<PAGE> 1
As filed with the Securities and Exchange Commission on April 28, 1998
REGISTRATION NO. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
ONYX ACCEPTANCE AUTO LOAN TRUSTS
(Issuer with respect to the Securities)
ONYX ACCEPTANCE FINANCIAL CORPORATION
(Originator of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 9999 33-0639768
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
-----------
8001 IRVINE CENTER DRIVE, 6TH FLOOR
IRVINE, CALIFORNIA 92618
(949) 450-5500
(Address, including zip code, and telephone number,
including area code, of Originator's principal executive offices)
REGAN E. KELLY
EXECUTIVE VICE PRESIDENT
8001 IRVINE CENTER DRIVE, 5TH FLOOR
IRVINE, CALIFORNIA 92618
(949) 450-5509
(Name, address, including zip code, and telephone number,
including area code, of agent for service with respect to
the Registrant)
COPIES TO:
DAVID A. ALLEN, ESQ.
ANDREWS & KURTH L.L.P.
1717 MAIN STREET, SUITE 3700
DALLAS, TEXAS 75201
(214) 659-4433
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ________________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Maximum Proposed Amount of
Proposed Title of Securities to Offering Price Per Maximum Aggregate Registration
be Registered Amount to Be Registered Unit(1) Offering Price (1) Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Auto Loan Backed Notes and
Auto Loan Pass-Through
Certificates $1,000,000 100% $1,000,000 $295
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE> 2
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to
the offering of one or more series of Auto Loan Backed Notes and/or Auto Loan
Pass-Through Certificates by various Trusts created from time to time by Onyx
Acceptance Financial Corporation and (ii) two forms of Prospectus Supplement
relating to the offering by a separate trust of a particular series of Auto Loan
Pass-Through Certificates and/or Auto Loan Backed Notes described therein. Each
form of Prospectus Supplement relates only to the securities described therein
and is a form which may be used, among others, by Onyx Acceptance Financial
Corporation to offer Auto Loan Backed Notes and/or Auto Loan Pass-Through
Certificates under this Registration Statement.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus Supplement and the accompanying Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus dated _________, 199__)
LOGO
$____________
ONYX ACCEPTANCE OWNER TRUST 199_-_
$__________ ____% AUTO LOAN BACKED NOTES, CLASS A-1
$__________ ____% AUTO LOAN BACKED NOTES, CLASS A-2
$__________ ____% AUTO LOAN BACKED NOTES, CLASS A-3
ONYX ACCEPTANCE FINANCIAL CORPORATION,
Seller
ONYX ACCEPTANCE CORPORATION,
Servicer
The Onyx Acceptance Owner Trust 199_-_ (the "TRUST") will be formed
pursuant to a Trust Agreement to be entered into between Onyx Acceptance
Financial Corporation, as seller (the "SELLER") and ______________, as owner
trustee (the "OWNER TRUSTEE"). The Notes will be issued pursuant to an Indenture
to be dated as of ________, 199__, between the Trust and ___________, as
Indenture Trustee. The Trust will issue $_______ aggregate principal amount of
Class A-1 ____% Auto Loan Backed Notes (the "CLASS A-1 NOTES"), $________
aggregate principal amount of Class A-2 ____% Auto Loan Backed Notes (the "CLASS
A-2 NOTES") and $________ aggregate principal balance Class A-3 ____% Auto Loan
Backed Notes
(continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" COMMENCING ON PAGE S-11 HEREOF AND PAGE 6 OF THE ACCOMPANYING
PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE SELLER, ONYX OR ANY OF THEIR
RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT SELLER(1)(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note.................. ____% ____% ____%
Per Class A-2 Note.................. ____% ____% ____%
Per Class A-3 Note.................. ____% ____% ____%
Total............................... $_______ $______ $_______
=================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, calculated from _____, 199_.
(2) Before deducting expenses payable by the Seller estimated to be $______.
The Notes are offered by the Underwriters when, as and if delivered
to and accepted by the Underwriters, and subject to their right to reject orders
in whole or in part. It is expected that delivery of the Notes in book-entry
form will be made through the facilities of The Depository Trust Company ("DTC")
against payment in immediately available funds on or about _________, 199__.
[UNDERWRITERS]
The date of this Prospectus Supplement is ______, 199_.
<PAGE> 4
(continued from previous page)
(the "CLASS A-3 NOTES" and, together with the Class A-1 Notes and the Class A-2
Notes, the "NOTES"). The Trust property will include a pool of fixed rate Rule
of 78's and Simple Interest Method motor vehicle retail installment sales
contracts (the "CONTRACTS") secured by new and used automobiles and light-duty
trucks (the "FINANCED VEHICLES"), certain monies due under certain Contracts on
or after _____, 199_ (the "CUT-OFF DATE"), security interests in the Financed
Vehicles, the benefits of a financial guarantee insurance policy (the "FINANCIAL
GUARANTEE INSURANCE POLICY") issued by _______________ (the "INSURER"), amounts
on deposit in the Prefunding Account described herein, amounts on deposit in the
Capitalized Interest Account described herein, and certain other property, all
as more fully described herein. The initial Aggregate Scheduled Balance (as
defined herein) of the Initial Contracts as of the Cut-Off Date was $__________.
From time to time on or before _______, 199_, the Prefunded Amount will be used
for purchase by the Trust of additional Rule of 78's and Simple Interest Method
contracts (the "SUBSEQUENT CONTRACTS" and together with the Initial Contracts,
the "CONTRACTS") secured by new and used automobiles and light duty trucks (the
"SUBSEQUENT FINANCED VEHICLES" and, together with the Initial Financed Vehicles,
the "FINANCED VEHICLES"). Onyx Acceptance Corporation ("ONYX") will act as
servicer of the Contracts (the "SERVICER").
Interest on all classes of Notes will accrue at the fixed per annum
interest rates specified above. Interest on the Notes will generally be payable
to the Noteholders on the 15th day of each month (or, if the 15th day is not a
Business Day, the following Business Day) (each, a "DISTRIBUTION DATE")
commencing _____ 15, 199_. Principal on the Notes will be payable on each
Distribution Date to the extent described herein, except that no principal will
be paid on a class of Notes until each class of Notes having a lower numerical
class designation has been paid in full.
Each class of the Notes will be payable in full on the applicable
Final Scheduled Distribution Date as set forth herein. However, payment in full
of a class of Notes could occur earlier than such dates as described herein. In
addition, the Class A-3 Notes will be subject to redemption in whole, but not in
part, on any Distribution Date on which the Servicer exercises its option to
purchase the Contracts. The Seller or the Servicer, or any successor to the
Servicer, may purchase the Contracts when the aggregate principal balance of the
Contracts shall have declined to 10% or less of the initial aggregate principal
balance of the Contracts purchased by the Trust.
It is a condition of issuance that the Class A-1 Notes be rated ____
by ________ and ____ by ________, that the Class A-2 Notes by rated ____ by
________ and ____ by ________, and the Class A-3 Notes be rated ____ by ________
and ____ by ________. Such ratings will be based primarily on the issuance of
the Financial Guarantee Insurance Policy by the Insurer. Under the Financial
Guarantee Insurance Policy, the Insurer has unconditionally and irrevocably
guaranteed payment of accrued interest and of the Principal Distribution on each
Distribution Date, including the Final Scheduled Distribution Date of each class
of Notes. See "Description of the Notes -- The Financial Guarantee Insurance
Policy".
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES MAY NOT BE CONSUMMATED
UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT
WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH NOTES, AND THE IMPOSITION OF PENALTY BIDS, DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
-ii-
<PAGE> 5
AVAILABLE INFORMATION
The Seller, on behalf of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission (the "COMMISSION") with respect to the Notes offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information included in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement and amendments thereof and to
the exhibits thereto, which are available for inspection without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of which may be obtained from the Commission at
prescribed rates. The Commission also maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the Servicer
and the Trust, and the address is http://www.sec.gov. The Servicer, on behalf of
the Trust, will also file or cause to be filed with the Commission such periodic
reports as are required under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and the rules and regulations of the Commission thereunder,
and such reports can be obtained as described above. Such reports will include
Current Reports on Form 8-K filed after each Distribution Date, and an Annual
Report on Form 10-K. Such reports will contain certain financial information
regarding the Trust, including the Distribution Date Statement which will be
furnished monthly to Noteholders as described under "Reports to Noteholders"
below. Reports on Form 8-K and Form 10-K will not be filed for any period which
ends after _________, 199_; however, the Noteholders will continue to receive
the Distribution Date Statement monthly, as described below.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued (which will occur under
the limited circumstances described herein and in the Prospectus), the unaudited
monthly and annual reports concerning the Trust which are described in the
Prospectus under "Certain Information Regarding the Securities -- Statements to
Securityholders" and are prepared by the Servicer will be sent by the Owner
Trustee only to Cede & Co. as the nominee of DTC and the registered holder of
the Notes. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. These reports may be
obtained by Note Owners by a request in writing to the Owner Trustee. See
"Description of the Securities -- Book-Entry Registration" in the Prospectus.
None of the Seller, the Servicer or the Insurer intends to send any of its
financial reports to the Noteholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the documents described in the Prospectus under
"Incorporation of Certain Documents by Reference," the consolidated financial
statements of the Insurer included in, or as exhibits to, the following
documents which have been filed with the Commission by the Insurer, are hereby
incorporated by reference in this Prospectus Supplement:
(a) Annual Report on Form 10-K for the year ended December 31, 199_,
(b) Quarterly Report on Form 10-Q for the period ended March 31,
199_,
(c) Quarterly Report on Form 10-Q for the period ended June 30, 199_,
and
(d) Quarterly Report on Form 10-Q for the period ended September 30,
199_.
All financial statements of the Insurer included in documents filed
by the Insurer pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus Supplement and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference into this Prospectus Supplement and to be a part hereof from the
respective dates of filing of such documents.
-iii-
<PAGE> 6
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere herein and in the Prospectus.
Certain capitalized terms used in this Summary are defined elsewhere in this
Prospectus. See the Index of Terms for the location herein of the definitions of
certain capitalized terms or, to the extent not defined herein, the definition
assigned to such terms in the Prospectus. An investment in the Notes involves
various risks, and potential purchasers should carefully consider the matters
discussed under "Risk Factors" herein and in the Prospectus in considering an
investment in the Notes.
ISSUER..................... Onyx Acceptance Owner Trust 199_-_ (the "TRUST"
or the "ISSUER"), a Delaware business trust
established pursuant to a Trust Agreement dated
as of ______1, 199_ (the "TRUST AGREEMENT"),
among the Seller and the Owner Trustee.
SELLER..................... Onyx Acceptance Financial Corporation (the
"SELLER"), a wholly- owned, limited purpose
subsidiary of Onyx Acceptance Corporation
("ONYX").
SERVICER................... Onyx. See "The Servicer" in the Prospectus.
INDENTURE TRUSTEE.......... ___________________, as trustee under the
Indenture (the "INDENTURE TRUSTEE").
OWNER TRUSTEE.............. ____________________, as trustee under the Trust
Agreement (the "OWNER TRUSTEE").
THE NOTES.................. The Trust will issue Auto Loan Backed Notes (the
"NOTES") pursuant to an Indenture to be dated as
of ____________, 199__ (as amended and
supplemented from time to time, the "INDENTURE"),
between the Issuer and the Indenture Trustee, as
follows: (1) Class A-1 ___% Auto Loan Backed
Notes (the "CLASS A-1 NOTES") in the aggregate
principal amount of $______________; (2) Class
A-2 ___% Auto Loan Backed Notes (the "CLASS A-2
NOTES") in the aggregate principal amount of
$_______________; and (3) Class A-3 ___% Auto
Loan Backed Notes (the "CLASS A-3 NOTES") in the
aggregate principal amount of $___________. The
Notes will be secured by the assets of the Trust
pursuant to the Indenture.
TRUST PROPERTY............. The Trust's assets (the "TRUST PROPERTY") will
include: (i) a pool of fixed rate motor vehicle
retail installment sales contracts (the "INITIAL
CONTRACTS") of which approximately ____% of the
Aggregate Scheduled Balance as of the Cut-Off
Date are Rule of 78's Contracts and approximately
____% of the Aggregate Scheduled Balance as of
the Cut-Off Date are Simple Interest Contracts,
and all of which were purchased from the Seller
and secured by new and used automobiles and
light-duty trucks (the "INITIAL FINANCED
VEHICLES"), (ii) certain documents relating to
the Initial Contracts, (iii) certain monies due
under such Initial Contracts on or after the
Cut-Off Date, (iv) security interests in the
Initial Financed Vehicles and the rights to
receive proceeds from claims on certain insurance
policies covering the Initial Financed Vehicles
or the individual obligors under each related
Initial Contract, (v) all amounts on deposit in
the Collection Account, including all Eligible
Investments credited thereto (but excluding any
S-1
<PAGE> 7
investment income from Eligible Investments,
which will be paid to the Servicer), (vi) the
benefits of a financial guarantee insurance
policy (the "FINANCIAL GUARANTEE INSURANCE
POLICY") issued by ______________ (the
"INSURER"), (vii) the right of the Seller to
cause Onyx to repurchase certain Contracts under
certain circumstances, (viii) funds on deposit in
the Capitalized Interest Account, (ix) funds on
deposit in a trust account established for the
benefit of the Noteholders (the "PREFUNDING
ACCOUNT") and (x) all proceeds of the foregoing.
From time to time during the Funding Period, and
as frequently as each Business Day (each such day
a "SUBSEQUENT TRANSFER DATE"), the Trust will
purchase from the Seller with monies on deposit
in the Prefunding Account, additional Rule of
78's and Simple Interest Method contracts (the
"SUBSEQUENT CONTRACTS" and, together with the
Initial Contracts, the "CONTRACTS") secured by
new and used automobile and light-duty trucks
(the "SUBSEQUENT FINANCED VEHICLES" and, together
with the Initial Financed Vehicles, the "FINANCED
VEHICLES"). As of each such Subsequent Transfer
Date, the Trust Property will include the
Subsequent Contracts delivered to the Trustee on
such Subsequent Transfer Date, certain documents
relating to the Subsequent Contracts, certain
monies due under the Subsequent Contracts after
the related Subsequent Transfer Dates, security
interests in the Subsequent Financed Vehicles and
the right to receive proceeds from claims under
certain insurance policies in respect of
individual Subsequent Financed Vehicles or the
related obligors, and all proceeds of the
foregoing. See "The Trust" herein and "The
Trusts" in the Prospectus.
DISTRIBUTION DATE.......... The 15th day of each month (or, if such day is
not a Business Day, the next succeeding Business
Day) commencing ______ 15, 199_ (each a
"DISTRIBUTION DATE"). A "BUSINESS DAY" is a day
other than a Saturday, Sunday or other day on
which commercial banks located in California or
New York are authorized or obligated to be
closed.
COLLECTION PERIOD.......... A "COLLECTION PERIOD" with respect to a
Distribution Date will be the calendar month
preceding the month in which such Distribution
Date occurs; provided, that with respect to
Liquidated Contracts (as defined below) the
Collection Period will be the period from but
excluding the sixth Business Day preceding the
immediately preceding Distribution Date to and
including the sixth Business Day preceding such
Distribution Date. With respect to the first
Distribution Date the "COLLECTION PERIOD" for
Liquidated Contracts will be the period from and
including the Cut-Off Date to and including the
sixth Business Day preceding such first
Distribution Date.
FINAL SCHEDULED
DISTRIBUTION DATES......... The outstanding principal amount of the Class A-1
Notes, to the extent not previously paid, will be
payable on _______, 199__ (the "CLASS A-1 FINAL
SCHEDULED DISTRIBUTION DATE"), the outstanding
principal amount of the Class A-2 Notes, to the
extent not previously paid, will be payable on
__________, 199__ (the "CLASS A-2 FINAL SCHEDULED
DISTRIBUTION DATE") and the outstanding principal
amount of the Class A-3 Notes, to the extent not
previously paid, will be payable on __________,
199__ (the "CLASS A-3 FINAL SCHEDULED
S-2
<PAGE> 8
DISTRIBUTION DATE", and each a "FINAL SCHEDULED
DISTRIBUTION DATE").
INTEREST RATES............. The Notes will bear interest as follows: (i) with
respect to Class A-1 Notes, at the rate of ___%
per annum (the "CLASS A-1 RATE"), (ii) with
respect to the Class A-2 Notes, at the rate of
___% per annum (the "CLASS A-2 RATE"), and (iii)
with respect to the Class A-3 Notes, at the rate
of ___% per annum (the "CLASS A-3 RATE" and,
together with the Class A-1 Rate and the Class
A-2 Rate, the "INTEREST RATES").
PAYMENTS OF INTEREST....... With respect to each Distribution Date, interest
on the principal balances of the classes of the
Notes will accrue at the respective per annum
Interest Rates during the period from and
including the prior Distribution Date (or in the
case of the first Distribution Date from and
including the Closing Date) to but excluding the
applicable Distribution Date (each, an "INTEREST
ACCRUAL PERIOD") and will be payable to the
Noteholders monthly on each related Distribution
Date commencing ______________, 199__. Interest
in the Notes will be calculated on the basis of a
360-day year of twelve 30-day months. See
"Description of the Notes-- Payments of Interest
and Principal" herein.
PAYMENTS OF PRINCIPAL...... On each Distribution Date, the Principal
Distribution for the related Collection Period
will be applied on each Distribution Date, first,
to make payments of principal on the Class A-1
Notes until the aggregate principal balance
thereof is reduced to zero, then second, to make
payments of principal on the Class A-2 Notes
until the aggregate principal balance thereof is
reduced to zero and then third, to make payments
of principal on the Class A-3 Notes until the
aggregate principal balance thereof is reduced to
zero. In addition, the outstanding principal
balance of the Notes of any class, to the extent
not previously paid, will be payable on the
respective Final Scheduled Distribution Date for
such class. The actual date on which the
aggregate outstanding principal balance of any
class of Notes is paid may be earlier than the
Final Scheduled Distribution Date for such class,
depending on a variety of factors. The "PRINCIPAL
DISTRIBUTION" on any Distribution Date is the
Aggregate Scheduled Balance Decline (as defined
below) for such Distribution Date and, with
respect to the Distribution Date immediately
following the end of the Funding Period, any
portion of the Prefunded Amount remaining on
deposit in the Prefunding Account. The "AGGREGATE
SCHEDULED BALANCE DECLINE" for any Distribution
Date is the sum of (x) the amount by which the
Aggregate Scheduled Balance of the Contracts as
of the beginning of the related Collection Period
exceeds the Aggregate Scheduled Balance of such
Contracts as of the end of the related Collection
Period (excluding any Subsequent Contracts added
during the related Collection Period) and (y) the
amount by which the Aggregate Scheduled Balance
of the Subsequent Contracts (determined as of
each related Subsequent Transfer Date)
transferred to the Trust during the related
Collection Period exceeds the Aggregate Scheduled
Balance of such Subsequent Contracts as of the
end of the related Collection Period. The
"AGGREGATE SCHEDULED BALANCE" of the Contracts is
the sum of the Scheduled Balance of
S-3
<PAGE> 9
each Contract. The "SCHEDULED BALANCE" of a Rule
of 78's Contract at any date is equal to the
Cut-Off Date Scheduled Balance of such Contract
reduced by the portion of each scheduled payment
of principal and interest due on such Contract
(the "MONTHLY P&I") on or prior to the date of
calculation that is allocated to principal under
the Recomputed Actuarial Method. The Scheduled
Balance of a Simple Interest Contract at any date
is equal to the Cut-Off Date Scheduled Balance of
such Contract reduced by the portion of Monthly
P&I paid on or prior to the date of calculation
that is allocated to principal under the Simple
Interest Method. The Scheduled Balance of any
Contract that is a Liquidated Contract or that
has been purchased by the Servicer or repurchased
by the Seller will equal zero. A "LIQUIDATED
CONTRACT" is a Contract that (a) is the subject
of a Full Prepayment, (b) is a Defaulted Contract
and with respect to which Liquidation Proceeds
constituting, in the Servicer's reasonable
judgment, the final amounts recoverable have been
received and deposited in the Collection Account,
(c) is paid in full on or after its Maturity Date
or (d) has been a Defaulted Contract for four or
more Collection Periods and as to which
Liquidation Proceeds have not been deposited in
the Collection Account; provided, however, that
in any event a Contract that is delinquent in the
amount of five monthly installments of Monthly
P&I at the end of a Collection Period is a
Liquidated Contract. A "DEFAULTED CONTRACT" with
respect to any Collection Period is a Contract
(a) which is, at the end of such Collection
Period, delinquent in the amount of two monthly
installments of Monthly P&I or (b) with respect
to which the related Financed Vehicle has been
repossessed or repossession efforts with respect
to the related Financed Vehicle have been
commenced.
See "The Contracts" herein and in the Prospectus
and "Description of the Notes -- Payments of
Principal" herein.
In addition, on each Distribution Date through
the Accelerated Principal Termination Date, the
Accelerated Principal Distribution for such
Distribution Date will be applied to make
payments on the Class A-1 Notes until the
aggregate principal balance thereof is reduced to
zero. The "ACCELERATED PRINCIPAL DISTRIBUTION"
with respect to a Distribution Date will equal
the lesser of (i) the sum of (x) the excess, if
any, of the Available Funds with respect to such
Distribution Date over the amounts payable on
such Payment Date pursuant to clauses (i)-(vii)
under "Description of the Transfer and Servicing
Agreements -- Distributions" herein plus (y)
amounts, if any, available from the Spread
Account (as defined herein) in accordance with
the Insurance Agreement and (ii) the excess, if
any, of (x) the product of (I) ___% and (II) the
sum of the Pool Balance and the Pre-Funded Amount
as of the end of the preceding Collection Period
(such product, the "REQUIRED NOTE BALANCE" with
respect to such Distribution Date) over (y) the
aggregate principal balance of the Notes on such
Distribution Date, after giving effect to the
payments made pursuant to clauses (i)-(v) under
"Description of the Transfer and Servicing
Agreements -- Distributions" herein (the "PRO
FORMA NOTE BALANCE" with respect to such
Distribution Date). The requirement to pay
Accelerated Principal Distributions will
terminate on the "ACCELERATED PAYMENT TERMINATION
DATE," which is the later to occur of (i) the
first Distribution Date on which the related Pro
S-4
<PAGE> 10
Forma Note Balance equals the related Required
Note Balance and (ii) the Distribution Date on
which aggregate principal balance of the Class
A-1 Notes is reduced to zero. The Insurer will
not guarantee payment of Accelerated Principal
Distributions.
OPTIONAL REDEMPTION........ The Class A-3 Notes, to the extent still
outstanding, will be redeemed in whole, but not
in part, on any Distribution Date on which the
Seller or the Servicer, or any successor to the
Servicer, exercises its option to purchase the
Contracts, which can occur after the Pool Balance
declines to ____% or less of the Original Pool
Balance, at a redemption price equal to the
greater of (i) the sum of (x) the Aggregate
Scheduled Balance of such Contracts on the date
of repurchase plus (y) accrued and unpaid
interest therein and (ii) the sum of (x) the
unpaid principal amount of such Notes, plus (y)
accrued and unpaid interest thereon, plus (z) all
amounts due to the Insurer under the Insurance
Agreement. See "Description of the Notes--
Optional Redemption" herein. The "ORIGINAL POOL
BALANCE" will equal the sum of (i) the Cut-Off
Date Scheduled Balance for all of the Initial
Contracts and (ii) the Prefunded Amount.
THE PREFUNDING ACCOUNT..... The Prefunding Account will be maintained in the
name of the Indenture Trustee for the benefit of
the Noteholders and is designed solely to hold
funds to be applied by the Indenture Trustee
during the Funding Period (as defined herein) to
pay to the Seller, on behalf of the Trust, the
purchase price for Subsequent Contracts. Monies
on deposit in the Prefunding Account will not be
available to cover losses on the Contracts, or
except as described under "Mandatory Redemption"
below, to make payment of the Notes. Interest on
the portion of the Notes represented by the
Prefunded Amount will be payable from earnings
received by the Indenture Trustee during the
related Collection Period from investment of the
Prefunded Amount on deposit in the Prefunding
Account and, pursuant to the terms of the
Indenture, from the Capitalized Interest Account,
and will not be payable from collections on the
Contracts.
The Prefunding Account will be created with an
initial deposit by the Seller of $__________ (the
"PREFUNDED AMOUNT"). The "FUNDING PERIOD" will be
the period from the date the Notes are issued
(the "CLOSING DATE") until the earliest to occur
of (i) the date on which the remaining Prefunded
Amount is less than $______, (ii) the date on
which a Servicer Default occurs or (iii) the
close of business on ________, 199_. During the
Funding Period, on one or more Subsequent
Transfer Dates (as defined herein), the Prefunded
Amount will be applied to purchase Subsequent
Contracts from the Seller. The Seller expects
that the Prefunded Amount will be reduced to less
than $_______ by the scheduled end of the Funding
Period, although no assurances can be given in
this regard. Any portion of the Prefunded Amount
remaining on deposit in the Prefunding Account at
the end of the Funding Period will be payable to
Noteholders on the Mandatory Redemption Date. See
"Description of the Notes -- The Prefunding
Account; Mandatory Partial Redemption of the
Notes" herein.
S-5
<PAGE> 11
MANDATORY REDEMPTION....... Each class of Notes will be redeemed in part on
the Distribution Date immediately succeeding the
date on which the Funding Period ends
(the "MANDATORY REDEMPTION DATE") in the event
that any portion of the Prefunded Amount remains
on deposit in the Prefunding Account after giving
effect to the sale to the Trust of all Subsequent
Contracts sold to the Trust during the Funding
Period, including any such acquisition and
conveyance on the date on which the Funding
Period ends (a "MANDATORY PARTIAL REDEMPTION").
The aggregate principal amount of each class of
Notes to be redeemed will be an amount equal to
such class's pro rata share (based on the
respective current principal balance of each
class of Notes) of the Prefunded Amount remaining
at the end of the Funding Period (such class's
"NOTE REDEMPTION AMOUNT"); provided, that if the
remaining Prefunded Amount is $________ or less,
such amount will be applied exclusively to reduce
the outstanding original balance of the class of
Notes than entitled to receive distributions of
principal. See "Description of the Notes-- The
Prefunding Account; Mandatory Partial Redemption
of the Notes" herein.
INDENTURE EVENT OF The Notes may be accelerated and subject to
DEFAULT ................ immediate payment at par upon the occurrence of
an Indenture Event of Default. Unless an Insurer
Default shall have occurred and be continuing,
"Indenture Events of Default" under the Indenture
will consist of these events defined in the
Insurance and Reimbursement Agreement as
Insurance Agreement Cross Defaults, and will
constitute an Indenture Event of Default only if
the Insurer shall have delivered to the Indenture
Trustee, and not rescinded, a written notice
specifying that any such Insurance Agreement
Indenture Cross Default constitutes an Indenture
Event of Default.
In the case of such an Indenture Event of
Default, the Notes will automatically be
accelerated and subject to immediate payment at
par. The Financial Guarantee Insurance Policy
does not guarantee payment of any amounts that
become due on an accelerated basis, unless the
Insurer elects, in its sole discretion, to pay
such amounts in whole or in part. See
"Description of the Notes - Indenture Events of
Default" herein.
CAPITALIZED INTEREST
ACCOUNT.................. In order to cover the shortfall between interest
distributable on the portion of the Notes
represented by the Prefunded Amount and interest
which will be earned by the Trust on the
Prefunded Amount prior to the time it is used to
purchase Subsequent Contracts, the Indenture will
provide for payment by the Seller of the
Capitalized Interest Amount on or before five
business days prior to each Distribution Date,
ending with the Distribution Date on _________,
199_. The "CAPITALIZED INTEREST AMOUNT," with
respect to any Collection Period is an amount
equal to (a) one month's interest on the
Prefunded Amount on deposit in the Prefunding
Account as of the first day of such Collection
Period at the weighted average Interest Rate of
the Notes plus (b) one-twelfth of the premium for
the Financial Guarantee Insurance Policy on the
Prefunded Amount minus (c) the earnings received
by the Indenture Trustee during the related
Collection Period from investment of the
Prefunded Amount on deposit in the Prefunding
Account.
S-6
<PAGE> 12
The obligation of the Seller to pay the
Capitalized Interest Amount will be secured by
funds on deposit in a segregated trust account to
be maintained for the benefit of the Noteholders
and the Insurer (the "CAPITALIZED INTEREST
ACCOUNT"). The amount required to be deposited in
the Capitalized Interest Account will initially
be equal to the maximum Capitalized Interest
Amount that may become owing under the Indenture
assuming that with respect to the Prefunded
Amount during the Funding Period, a certain rate
of interest (set forth in the Indenture) is
earned and no Subsequent Contracts are purchased.
On each Subsequent Closing Date, certain amounts
shall be released to the Seller from the
Capitalized Interest Account with respect to
Subsequent Contracts acquired by the Trust on
each Subsequent Transfer Date since the preceding
Subsequent Closing Date, or the Closing Date, as
the case may be. See "Description of the Notes --
Capitalized Interest Account" herein.
FINANCIAL GUARANTEE
INSURANCE POLICY........... On the Closing Date, the Insurer will issue the
Financial Guarantee Insurance Policy to the
Indenture Trustee pursuant to an Insurance and
Reimbursement Agreement (the "INSURANCE
AGREEMENT"), dated as of ________, 199_, by and
among the Insurer, Onyx, the Seller and the
Indenture Trustee. The Financial Guarantee
Insurance Policy is a "Security Insurance Policy"
as referred to in the Prospectus. Pursuant to the
Financial Guarantee Insurance Policy, the Insurer
will unconditionally and irrevocably guarantee
payment of accrued interest and of the Principal
Distribution on each Distribution Date to the
Indenture Trustee for the benefit of the
Noteholders. If on the fifth Business Day prior
to any Distribution Date (the "SERVICER REPORT
DATE") the amount on deposit and available in the
Collection Account, after giving effect to all
amounts deposited or payable from the Payahead
Account with respect to such Distribution Date,
is less than the sum of the Servicing Fee, the
Principal Distribution and accrued interest
payable for such Distribution Date, the Indenture
Trustee, by delivering a notice in accordance
with the Financial Guarantee Insurance Policy,
shall demand payment under the Financial
Guarantee Insurance Policy in an amount equal to
such deficiency. The Insurer shall pay or cause
to be paid such amount to the Indenture Trustee
for credit to the Collection Account and the
Indenture Trustee shall withdraw from the
Collection Account and shall pay such amount to
the Noteholders on the related Distribution Date.
On the Final Distribution Date with respect to
each class of Notes, to the extent the amount on
deposit and available in the Collection Account
to make payments of interests and principal on
such class of Notes is less than all remaining
unpaid interest and principal on such class of
Notes, the Insurer shall pay or cause to be paid
an amount equal to such shortfall. See
"Description of the Notes-- The Financial
Guarantee Insurance Policy" herein.
SERVICING FEE.............. The Servicer will be responsible for managing,
administering, servicing, and making collections
on the Contracts. Compensation to
the Servicer will consist of a monthly fee (the
"SERVICING FEE"), payable by the Trust to the
Servicer on each Distribution Date, in an amount
equal to the product of one-twelfth of ____% per
annum (the "SERVICING FEE RATE") multiplied by
the Pool Balance (excluding the Prefunded Amount)
as of the end of the Collection Period preceding
S-7
<PAGE> 13
the related Collection Period. As additional
compensation, the Servicer will be entitled to
any late fees and other administrative fees and
expenses or similar charges collected with
respect to the Contracts. The Servicer or its
designee will also receive as servicing
compensation investment earnings on Eligible
Investments (other than earnings on amounts on
deposit in the Prefunding Account) and the
amount, if any, by which the outstanding
principal balance of a Rule of 78's Contract that
is subject to a Full Prepayment exceeds the
Scheduled Balance of such Contract. See
"Description of the Transfer and Servicing
Agreements -- Servicing Fee" herein.
CONTRACTS.................. The Initial Contracts have been, and the
Subsequent Contracts will be, purchased by the
Trust from the Seller pursuant to a Sale and
Servicing Agreement dated as of _______, 199__
(as amended and supplemented from time to time,
the "AGREEMENT"). The Aggregate Scheduled Balance
of the Initial Contracts as of the Cut-Off Date
was $__________. As of the Cut-Off Date the
Initial Contracts had a weighted average annual
percentage rate of ____% and a weighted average
remaining term of ____ months. Approximately
_____% of the Aggregate Scheduled Balance of the
Initial Contracts as of the Cut-Off Date allocate
interest and principal in accordance with the
Rule of 78's (the "RULE OF 78'S CONTRACTS"), and
approximately ____% in accordance with the Simple
Interest Method (the "SIMPLE INTEREST
CONTRACTS"). Approximately _____% of the
Aggregate Scheduled Balance of the Initial
Contracts as of the Cut-Off Date were originated
in California, ____% in Florida, ____% in
Washington, ____% in Arizona, ____% in Illinois,
and ____% in Nevada. No more than ___% of the
Initial Contracts were originated in any other
single state.
No later than the second Business Day following
the Business Day on which Onyx originates or
acquires a Motor Vehicle Contract during the
Funding Period, pursuant to the applicable
Purchase Agreement, Onyx and/or a Selling
Subsidiary will sell, and the Seller will
purchase, those Motor Vehicle Contracts that meet
the eligibility requirements at a purchase price
equal to the aggregate principal amount thereof.
Pursuant to the Agreement and subject to the
satisfaction of certain conditions described
herein, the Seller will sell Subsequent Contracts
to the Trust on each Subsequent Transfer Date.
Payment for each such Subsequent Contract sold to
the Trust shall be made by release to the Seller
from the Prefunding Account of an amount equal to
the amount paid by the Seller to Onyx and/or a
Selling Subsidiary for such Subsequent Contract.
The aggregate principal balance of the Subsequent
Contracts to be conveyed to the Trust during the
Funding Period will not exceed $_________, which
is equal to the Prefunded Amount. On the Business
Day preceding the first Distribution Date and on
the Business Day preceding each Distribution Date
immediately following a Subsequent Transfer Date
(each such date a "SUBSEQUENT CLOSING DATE"), UCC
financing statements with respect to all
Subsequent Contracts sold to the Trust since the
preceding Subsequent Closing Date (or the Closing
Date, in the case of the first Subsequent Closing
Date) will be filed and all required legal
opinions, officers' certificates and other legal
documentation with respect to the sale of such
Subsequent Contracts to the Trust will be
executed and delivered.
S-8
<PAGE> 14
All collections of Monthly P&I, all prepayments
on the Contracts collected by the Servicer and
all amounts paid under the Financial Guarantee
Insurance Policy will be deposited in or credited
to the Collection Account. Partial prepayments of
Monthly P&I ("PAYAHEADS") on Rule of 78's
Contracts will be transferred on the Servicer
Report Date to the Payahead Account, to be
applied against future scheduled payments of
Monthly P&I. Partial and full prepayments on
Simple Interest Contracts will be paid to
Noteholders on the Distribution Date immediately
following the Collection Period in which such
prepayments are received. All payments to the
Noteholders will be made from the Collection
Account and certain funds remaining in the
Collection Account following payments to
Noteholders and others will be paid to the
Insurer to be promptly distributed in accordance
with the terms of the Insurance Agreement. See
"The Contracts" herein and in the Prospectus, and
"Description of the Transfer and Servicing
Agreements -- Payahead Account" in the
Prospectus.
FEDERAL INCOME TAX
STATUS..................... In the opinion of Andrews & Kurth L.L.P. ("TAX
COUNSEL") (i) for federal income tax purposes,
the Notes will be characterized as debt, and the
Trust will not be characterized as an association
(or a publicly traded partnership) taxable as a
corporation and (ii) the same characterization
will apply for California income and franchise
tax purposes. Each Noteholder, by the acceptance
of a Note, will agree to treat the Notes as
indebtedness. See "Certain Federal Income Tax
Consequences" and "Certain State Tax Consequences
with respect to Trusts for which a Partnership
Election is Made" in the Prospectus for
additional information concerning the application
of federal income and California tax laws to the
Trust and the Notes.
ERISA CONSIDERATIONS....... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes will be eligible for
purchase by employee benefit plans that are
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). See
"ERISA Considerations" herein and in the
Prospectus. Any benefit plan fiduciary
considering purchase of the Notes should, among
other things, consult with its counsel in
determining whether all required conditions have
been satisfied.
LEGAL INVESTMENT........... The Class A-1 Notes have been structured to be
eligible securities for purchase by money market
funds under Rule 2a-7 under the Investment
Company Act of 1940, as amended. A money market
fund should consult its legal advisors regarding
the eligibility of the Class A-1 Notes under Rule
2a-7, the fund's investment policies and
objectives and an investment in the Class A-1
Notes.
S-9
<PAGE> 15
RATING..................... It is a condition of issuance that the Class A-1
Notes be rated ____by ___________ and ____ by
___________, that the Class A-2 Notes be rated
____ by ________ and ____ by ________, and the
Class A- 3 Notes be rated ____ by _______________
and ____ by _______________. Such ratings will be
based primarily on the issuance of the Financial
Guarantee Insurance Policy by the Insurer. See
"Risk Factors-- Rating" herein.
REGISTRATION OF THE
NOTES...................... The Notes will initially be represented by one or
more certificates registered in the name of Cede
& Co. ("CEDE"), as the nominee of The Depository
Trust Company ("DTC"). No person acquiring an
interest in a Note through the facilities of DTC
(a "NOTE OWNER") will be entitled to receive a
Definitive Note, except in the event that
Definitive Notes are issued in certain limited
circumstances. See "Description of the
Securities-- Book-Entry Registration" and
"--Definitive Securities" in the Prospectus.
S-10
<PAGE> 16
RISK FACTORS
Prospective investors in the Notes should consider the following risk
factors (as well as the factors set forth under "Risk Factors" in the
Prospectus) in connection with the purchase of Notes. Any statistical
information presented below is based upon the characteristics of the Contracts
proposed to be included in the Trust as of the date of this Prospectus
Supplement. Such information may vary as a result of the possibility that
certain Contracts may be removed from the Trust prior to the Closing Date.
LIMITED OPERATING HISTORY OF ONYX
All of the Contracts with respect to a series of Securities have been
or will be originally purchased by Onyx from Dealers or originated by Onyx or a
subsidiary of Onyx itself in accordance with credit underwriting criteria
established by Onyx. In February 1994, Onyx commenced its operations as a
purchaser and servicer of motor vehicle retail installment sales contracts.
Thus, Onyx has historical performance data for only a relatively short period
with respect to the motor vehicle retail installment sales contracts it
purchases and originates. Delinquencies and loan losses may increase from
existing levels in the portfolio with the passage of time.
Onyx is still at an early stage of operations and is subject to all
of the risks inherent in the establishment of a new business enterprise and
must, among other things, continue to attract, retain and motivate qualified
personnel, support and grow its auto lending and contract servicing business,
maintain its existing relationships with automobile dealers and develop new
relationships with dealers in and beyond Onyx's present market region. Onyx
experienced operating losses from inception through December 31, 1995. Onyx's
operating losses for the years ended December 31, 1994 and December 31, 1995
were $3.5 million and $3.1 million, respectively. Onyx's net income for the
years ended December 31, 1996 and December 31, 1997, and for the quarter ended
March 31, 1998, were $7.7 million, $2.6 million and $____ million, respectively.
LIMITED LIQUIDITY
There is currently no secondary market for the Notes. The
Underwriters currently intend, but are not obligated, to make a market in the
Notes. However, there can be no assurance that the Underwriters will make such a
market, that a secondary market will develop or, if it does develop, that it
will provide Noteholders with liquidity of investment or will continue for the
life of the Notes.
MATURITY AND PREPAYMENT CONSIDERATIONS
Any full prepayments and repurchases of the Contracts can reduce the
weighted average life of the Contracts and the aggregate interest received by
the Noteholders over the life of the Notes. Prepayments on Simple Interest
Contracts will shorten the average life of such Contracts and, therefore, of the
Notes, because they will be paid to Noteholders on the Distribution Date
immediately following the Collection Period in which such prepayments are
received. Partial prepayments on Rule of 78's Contracts will be treated as
Payaheads and accordingly will not affect the average life of the Contracts
because such payments will be held in the name of the Indenture Trustee, acting
on behalf of the Obligors and the Noteholders, as their interests may appear,
until paid in accordance with the original schedule of payments for such
Contracts. See "Description of the Transfer and Servicing Agreements -- Payahead
Account" in the Prospectus.
Onyx has limited historical experience with respect to prepayments,
has not as of the date hereof prepared data or prepayment rates, and is not
aware of publicly available industry statistics that set forth principal
prepayment experience for retail installment sales contracts similar to the
Contracts. Onyx can make no prediction as to the actual prepayment rates that
will be experienced on the Contracts in either stable or changing interest rate
environments. See "--Limited Operating History of Onyx" and "Maturity and
Prepayment Considerations" herein. Noteholders will bear all reinvestment risk
resulting from the rate of prepayment of the Contracts.
S-11
<PAGE> 17
MANDATORY PARTIAL REDEMPTION
No assurances can be given that sufficient Subsequent Contracts will
be generated to avoid a Mandatory Partial Redemption of the Notes. In the event
Onyx does not generate, for purchase by the Trust, sufficient Subsequent
Contracts to avoid Mandatory Partial Redemption of the Notes, the weighted
average life of the Notes will be shortened by any such Mandatory Partial
Redemption under the circumstances described under "Description of the Notes --
The Prefunding Account; Mandatory Partial Redemption of the Notes" herein.
Noteholders will bear all reinvestment risk resulting from any Mandatory Partial
Redemption due to Onyx's inability to generate sufficient additional Motor
Vehicle Contracts during the Funding Period.
Upon the occurrence of a Mandatory Partial Redemption, the holders of
Notes will receive an amount equal to the portion of the Prefunded Amount
remaining in the Prefunding Account. It is anticipated that the aggregate
principal amount of Subsequent Contracts sold to the Trust during the Funding
Period will not be exactly equal to the Prefunded Amount and that therefore
there will be at least a nominal amount of principal prepaid to Noteholders.
GEOGRAPHIC CONCENTRATION
Economic conditions in the states where the obligors under the
Contracts (each, an "OBLIGOR") reside may affect the delinquency, loan loss and
repossession experience of the Trust with respect to the Contracts.
Approximately ____% of the Aggregate Scheduled Balance of the Initial Contracts
as of the Cut-Off Date will have been originated in California, ____% in
Florida, ____% in Washington, ____% in Arizona, ____% in Illinois and _____% in
Nevada. No more than ____% of the Initial Contracts were originated in any other
single state. Subsequent Contracts may also be geographically concentrated in
one or more states. Adverse economic conditions or other factors particularly
affecting California, Arizona, Washington, Illinois, Florida, Nevada or any
other state in which the Contracts are geographically concentrated could
adversely affect the delinquency, loan loss or repossession experience of the
Trust.
LIMITED ASSETS
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Contracts, amounts on
deposit in the Prefunding Account, the right to receive payments from amounts on
deposit in the Capitalized Interest Account and the right to receive payments
under the Financial Guarantee Insurance Policy. Holders of the Notes must rely
for repayment upon payments on the Contracts and, if and to the extent
available, amounts on deposit in the Prefunding Account, the Capitalized
Interest Account and payments of claims made under the Financial Guarantee
Insurance Policy. The Prefunded Amount on deposit in the Prefunding Account will
be used solely to purchase Subsequent Contracts and is not available to cover
losses on the Contracts. The Capitalized Interest Account is designed to cover
obligations of the Trust relating to that portion of its assets not invested in
Contracts and is not designed to provide protection against losses on the
Contracts. Similarly, although the Financial Guarantee Insurance Policy will be
available to cover shortfalls in payment of the Principal Distribution and
accrued interest to Noteholders on the related Distribution Date, if the Insurer
defaults in its obligations under the Financial Guarantee Insurance Policy, the
Trust will depend on current distributions on the Contracts and amounts, if any,
available therefor in certain collateral accounts maintained for the benefit of
the Insurer to make payments on the Notes. See "Description of the Insurer" and
"Description of the Notes - The Financial Guarantee Insurance Policy" herein.
RATING
A security rating is not a recommendation to buy, sell or hold
securities and may be revised or withdrawn at any time by the assigning rating
agency. There can be no assurance that the ratings of the Notes will not be
lowered or withdrawn if, in the sole judgment of a Rating Agency, circumstances
in the future so warrant, including a downgrading of the Insurer. The Seller
cannot predict with certainty what effect any revision or withdrawal of a rating
of the Notes may have on the liquidity or market value of the Notes. Such
ratings of the Notes address the likelihood of the timely payment of each
scheduled Principal Distribution and payment of accrued interest, which are
guaranteed by the Insurer pursuant to the Financial Guarantee Insurance Policy.
Therefore, the ratings are primarily dependent on the rating of the Insurer, and
a change in the Insurer's rating may affect the ratings of the Notes. See
"Description of the Insurer" herein for a description of the Insurer's rating.
S-12
<PAGE> 18
INDENTURE EVENTS OF DEFAULT
So long as no Insurer Default shall have occurred and be continuing,
neither the Indenture Trustee nor the Noteholders may declare an Indenture Event
of Default under the Indenture. So long as an Insurer Default shall not have
occurred and be continuing, an Indenture Event of Default will occur only upon
delivery by the Insurer to the Indenture Trustee of notice of the occurrence of
certain events of default under the Insurance Agreement. Upon the occurrence of
an Indenture Event of Default (so long as an Insurer Default shall not have
occurred and be continuing), the Insurer will have the right, but not the
obligation, to cause the liquidation, in whole or in part, of the Trust
Property, which will result in redemption, in whole or in part, of the Notes.
Following the occurrence of an Indenture Event of Default, the Indenture Trustee
and the Owner Trustee will continue to submit claims under the Financial
Guarantee Insurance Policy as necessary to enable the Trust to continue to make
payments of the Noteholders' Distributable Amount on each Distribution Date.
However, following the occurrence of an Indenture Event of Default, the Insurer
may elect to pay all or any portion of the outstanding amount of the Notes, plus
accrued interest thereon.
THE TRUST
GENERAL
The Issuer, Onyx Acceptance Owner Trust 199_-_, is a business trust
formed under the laws of the State of Delaware pursuant to the Trust Agreement
for the transactions described in this Prospectus Supplement. The Trust will not
engage in any activity other than (i) acquiring, holding and managing the
Contracts and the other assets of the Trust and proceeds therefrom, (ii) issuing
the Notes and the Certificates, (iii) making payments on the Notes and (iv)
engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
The Trust's principal offices are in _______,_______, in care of
_______________, as Owner Trustee, at the address listed below under "--The
Owner Trustee."
THE OWNER TRUSTEE
_________________ is the Owner Trustee under the Trust Agreement, is
a ___________ banking corporation and its principal offices are located at
________________________________. The Owner Trustee will perform limited
administrative functions under the Trust Agreement. The Owner Trustee's
liability in connection with the issuance of the Certificates and the issuance
and sale of the Notes is limited solely to the express obligations of the Owner
Trustee set forth in the Trust Agreement and the Sale and Servicing Agreement.
TRUST PROPERTY
The Trust Property will include, among other things, the following:
(i) the Initial Contracts, of which approximately ____% of the Aggregate
Scheduled Balance as of the Cut-Off Date are Rule of 78's Contracts and
approximately ____% of the Aggregate Scheduled Balance as of the Cut-Off Date
are Simple Interest Contracts, and all of which was purchased from the Seller
and secured by the Initial Financed Vehicles, (ii) certain documents relating to
the Initial Contracts, (iii) certain monies due under such Initial Contracts on
or after the Cut-Off Date, (iv) security interests in the Initial Financed
Vehicles and the rights to receive proceeds from claims on certain insurance
policies covering the Initial Financed Vehicles or the Obligors, (v) all amounts
on deposit in the Collection Account, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible Investments,
which will be paid to the Servicer), (vi) the benefits of the Financial
Guarantee Insurance Policy issued by the Insurer, (vii) the right of the Seller
to cause Onyx to repurchase certain Contracts under certain circumstances,
(viii) funds on deposit in the Capitalized Interest Account, (ix) funds on
deposit in the Prefunding Account and (x) all proceeds of the foregoing. As of
each such Subsequent Transfer Date, the Trust Property will include the
Subsequent Contracts delivered to the Trustee on such Subsequent Transfer Date,
certain documents relating to the Subsequent Contracts, certain monies due under
the Subsequent Contracts after the related Subsequent Transfer Dates, security
interests in the Subsequent Financed Vehicles and the right to receive proceeds
from claims under certain insurance policies in respect of individual Subsequent
Financed Vehicles or the related obligors and all proceeds of the foregoing.
S-13
<PAGE> 19
Pursuant to the Indenture, the Trust will grant a security interest
in the Trust Property in favor of the Indenture Trustee on behalf of the
Noteholders and for the benefit of the Insurer in support of the obligations
owing to it under the Insurance Agreement.
THE ONYX PORTFOLIO OF MOTOR VEHICLE CONTRACTS
PURCHASE AND ORIGINATION OF MOTOR VEHICLE CONTRACTS
Onyx's portfolio of retail installment sales contracts and
installment loan agreements are secured by new and used automobiles and
light-duty trucks ("MOTOR VEHICLE CONTRACTS"). Motor Vehicle Contracts in Onyx's
portfolio are purchased by Onyx from Dealers that originate such contracts,
purchased by a subsidiary of Onyx from credit unions that originate such
contracts, or originated by Onyx or a subsidiary of Onyx. Substantially all of
the Initial Contracts have been, and the Subsequent Contracts will be, purchased
by Onyx from new and used car Dealers unaffiliated with Onyx and the Seller, and
a limited number of the Initial and Subsequent Contracts have been or will be
purchased or originated by subsidiaries of Onyx. All of the Initial Contracts
will have been, and all of the Subsequent Contracts will be, sold to the Seller
and then to the Trust. See "The Onyx Portfolio of Motor Vehicle Contracts --
Purchase and Origination of Motor Vehicle Contracts" in the Prospectus.
Approximately ____% of the Aggregate Scheduled Balance of the Initial
Contracts as of the Cut-Off Date will have been originated in California, ____%
in Florida, ____% in Washington, ____% in Arizona, ____% in Illinois and ____%
in Nevada. No more than ____% of the Initial Contracts were originated in any
other single state. See "Risk Factors -- Geographic Concentration". The payment
obligations of the Obligor under each Motor Vehicle Contract are secured by the
vehicle purchased with the loan proceeds provided under that Motor Vehicle
Contract.
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables set forth information with respect to the
experience of Onyx relating to delinquencies, loan losses and recoveries for the
portfolio of Motor Vehicle Contracts owned and serviced by Onyx on an annual
basis commencing December 31, 1994. The tables include delinquency information
relating to those Motor Vehicle Contracts that were purchased, originated, sold
and serviced by Onyx. All of the Motor Vehicle Contracts were originally
purchased by Onyx from Dealers, or originated by Onyx or a subsidiary of Onyx,
in accordance with credit underwriting criteria established by Onyx. In February
1994, Onyx commenced its operations as a purchaser and servicer of motor vehicle
retail installment sales contracts. Thus, Onyx has historical performance for
only a limited time period with respect to the Motor Vehicle Contracts it
purchases and originates and thus delinquencies and loan losses may increase
from existing levels in the portfolio with the passage of time. Delinquency and
loan loss experience may be influenced by a variety of economic, social and
other factors. See "Risk Factors" herein and in the Prospectus.
The delinquency and loss tables set forth below show increases in the
delinquency and loss rates experienced by Onyx over the period shown. Management
of Onyx believes that this is attributable, in part, to an increase on a
national basis in the level of bankruptcies and consumer defaults generally and
the tendency of delinquencies and losses, with respect to a pool of automobile
loans, to increase after a period of seasoning. Management believes that as the
average age of the Motor Vehicle Contracts included in Onyx's portfolio
increases, delinquencies and losses may continue to rise somewhat.
During the fourth quarter of 1996 and first quarter of 1997
management of Onyx enhanced the collections process by completing the
centralization of collections at Onyx's Irvine headquarters and hiring a manager
with over 25 years of collections experience to head the department. Collections
were previously handled at each of Onyx's Auto Finance Centers, each of which
was responsible for collections in certain geographic areas. Centralizing
collections is intended to reduce cost and enhance effectiveness by enabling
personnel to specialize in specific stages of the collections process, rather
than focusing on specific geographic areas. For example, a collections officer
previously working at a regional Auto Finance Center might have focused on a
particular geographic region and covered all stages of collections (e.g., from
delinquencies through bankruptcies). In the centralized collections operation,
this officer might cover all geographic areas, but focus on a particular stage
of collections (e.g., 60-day delinquencies).
S-14
<PAGE> 20
DELINQUENCY EXPERIENCE OF ONYX MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31, AT MARCH 31,
1994 1995 1996 1997 1998
------------------ ------------------ ------------------- ------------------- -------------------
AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio ...... $ 74,581 6,893 $218,207 20,156 $400,665 38,275 $757,277 73,502 $884,692 86,327
Delinquencies
30-59 days(1)(2) ....... $ 15 2 $ 1,608 153 $ 5,022 478 $ 11,902 1,211 $ 9,194 937
60-89 days(1)(2) ....... 27 4 470 35 1,816 162 3,370 346 2,863 277
90+ days(1)(2) ......... 12 1 547 42 1,279 111 3,742 316 3,573 320
Total Delinquencies as
a percent of servicing
portfolio .07% .10% 1.20% 1.14% 2.03% 1.96% 2.51% 2.55% 1.77% 1.78%
</TABLE>
- ----------
(1) Delinquencies include principal amounts only, net of repossessed inventory.
Repossessed inventory as a percent of the servicing portfolio was .00%,
.24%, .56%, 1.05% and .98% at December 31, 1994, 1995, 1996 and 1997 and
March 31, 1998 respectively.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
LOAN LOSS EXPERIENCE OF ONYX MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
----------------------------------------------------------- -----------
DEC.31, DEC. 31, DEC. 31, DEC. 31, MAR. 31
1994 1995 1996 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Number of Motor Vehicle Contracts outstanding 6,893 20,156 38,275 73,502 86,327
Period end outstanding ...................... $ 74,581 $ 218,207 $ 400,665 $ 757,277 $884,692
Average outstanding ......................... $ 29,301 $ 141,029 $ 311,340 $ 563,343 $815,922
Number of gross charge-offs ................. 0 197 987 2,161 818
Gross charge-offs ........................... $ 0 $ 548.2 $ 5,789.2 $ 13,076.1 $4,457.6
Net charge-offs(1) .......................... $ 0 $ 528.7 $ 5,066.1 $ 11,433.9 $3,761.8
Net charge-offs as a percent of period end
outstanding ............................... 0.0% .24% 1.26% 1.51% 1.70%
Net charge-offs as a percent of average
outstanding ............................... 0.0% .37% 1.63% 2.03% 1.84%
</TABLE>
- ----------
(1) Net charge-offs are gross charge-offs minus recoveries of Motor Vehicle
Contracts previously charged off.
S-15
<PAGE> 21
THE CONTRACTS
All of the Contracts will have been purchased by the Seller from Onyx
or from a subsidiary of Onyx (each such subsidiary, a "SELLING SUBSIDIARY").
Substantially all of the Contracts have been purchased by Onyx from new and used
car Dealers unaffiliated with Onyx or the Seller, and a limited number of
Contracts have been purchased or originated by subsidiaries of Onyx. See "The
Onyx Portfolio of Motor Vehicle Contracts" herein and in the Prospectus. Each of
the Contracts in the Trust (including each Subsequent Contract) will be a fixed
rate contract where the allocation of each payment between interest and
principal is calculated using the Rule of 78's or the Simple Interest Method.
Approximately ____% of the Aggregate Scheduled Balance of the Initial Contracts
as of the Cut-Off Date allocate interest and principal in accordance with the
Rule of 78's (the "RULE OF 78'S CONTRACTS"), and approximately _____% in
accordance with the Simple Interest Method (the "SIMPLE INTEREST CONTRACTS").
See "The Contracts" in the Prospectus.
The Initial Contracts were, and the Subsequent Contracts will be,
selected from the Motor Vehicle Contracts in the portfolio of Onyx using the
following criteria (the "ELIGIBILITY REQUIREMENTS"). No selection procedures
were used with respect to the Initial Contracts and none will be used with
respect to the Subsequent Contracts that are believed by Onyx or the Seller to
be adverse to the Noteholders or the Insurer. Approximately ____% of the
Aggregate Scheduled Balance of the Initial Contracts are secured by new Financed
Vehicles and approximately ____% of the Aggregate Scheduled Balance of the
Initial Contracts are secured by used Financed Vehicles. The Seller may not
substitute other Motor Vehicle Contracts for the Contracts at any time during
the term of the Agreement.
The Seller will represent that all of the Contracts included in the
Trust satisfy the following Eligibility Requirements:
(a) Such Contracts are or will be secured by a new or used automobile
or light-duty truck;
(b) Such Contracts have remaining maturities as of the Cut-Off Date
or related Subsequent Transfer Dates, as applicable, of not more than ___
months;
(c) Such Contracts have or will have original maturities of not more
than ___ months;
(d) Such Contracts (i) are or will be fully-amortizing fixed rate
contracts which provide for level scheduled monthly payments determined on the
basis of the Rule of 78's or the Simple Interest Method (except for the last
payment, which may be minimally different from the level payments) and (ii) have
or will have yields (using the Recomputed Yield for the Rule of 78's Contracts)
that equal or exceed ____%;
(e) Such Contracts are or will be secured by Financed Vehicles that,
as of the Cut-Off Date or related Subsequent Transfer Dates, as applicable, have
not been repossessed without reinstatement;
(f) Such Contracts have or will have no payment more than ___ days
past due as of the Cut-Off Date or related Subsequent Transfer Dates, as
applicable;
(g) Such Contracts or will have remaining principal balances as of
the Cut-Off Date or related Subsequent Transfer Dates, as applicable, of at
least $____;
(h) Such Contracts were or will be made to Obligors located in the
States of Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois,
Indiana, Missouri, Montana, New Jersey, New York, Nevada, Oregon, Texas, Utah,
Virginia and Washington; and
(i) As of the Cut-Off Date or related Subsequent Transfer Dates, as
applicable, the Seller has not received notice that any related Obligor has
filed for bankruptcy.
Set forth below is data concerning the Initial Contracts which, as of
the Cut-Off Date, had an Aggregate Scheduled Balance of $_________.
S-16
<PAGE> 22
COMPOSITION OF THE INITIAL CONTRACTS
<TABLE>
<S> <C>
Aggregate principal balance...................................... $______
Number of initial contracts...................................... _______
Average principal balance outstanding............................ $______
Average original amount financed................................. $______
Original amount financed (range)................................. $______ to ________
Weighted average APR............................................. _____%
APR (range)...................................................... ____% to ____%
Weighted average original term................................... ____ months
Original term (range)............................................ ___ to __ months
Weighted average remaining term.................................. _____ months
Remaining term (range)........................................... __ to __ months
</TABLE>
DISTRIBUTION BY APRS OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF AGGREGATE
INITIAL INITIAL PRINCIPAL SCHEDULED
APR RANGE(1) CONTRACTS CONTRACTS BALANCE BALANCE
------------ --------- --------- ------- -------
<S> <C> <C> <C> <C>
7.001% to 8.000%..................
8.001% to 9.000%..................
9.001% to 10.000%.................
10.001% to 11.000%................
11.001% to 12.000%................
12.001% to 13.000%................
13.001% to 14.000%................
14.001% to 15.000%................
15.001% to 16.000%................
16.001% to 17.000%................
17.001% to 18.000%................
18.001% to 19.000%................
19.001% to 20.000%................
20.001% to 21.000%................
21.001% and over..................
Totals..................
</TABLE>
- ----------
(1) Because the principal balance of each Contract sold to the Trust is
the Cut-Off Date Scheduled Balance, which in the case of Rule of 78's
Contracts is higher than what the principal balance of the Rule of
78's Contracts would have been had principal and interest been
allocated from the date of origination in accordance with the
actuarial method, the Recomputed Yield for each Rule of 78's Contract
is less than the apr of such Initial Contract specified herein. On a
weighted average basis, the yield for all the Initial Contracts,
using the Recomputed Yield for the Rule of 78's Contracts, in the
aggregate, is ____%. See "The Contracts" herein and in the
Prospectus.
S-17
<PAGE> 23
GEOGRAPHIC CONCENTRATION OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF AGGREGATE
INITIAL INITIAL PRINCIPAL SCHEDULED
CONTRACTS CONTRACTS BALANCE BALANCE
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Arizona.....................
California..................
Colorado....................
Florida.....................
Georgia.....................
Idaho.......................
Illinois....................
Indiana.....................
Missouri....................
Montana.....................
New Jersey..................
Nevada......................
New York....................
Oregon......................
Texas.......................
Utah........................
Virginia....................
Washington..................
Total.............
</TABLE>
MATURITY AND PREPAYMENT CONSIDERATIONS
The Contracts are prepayable in full by the Obligors at any time
without penalty. See "Maturity and Prepayment Considerations" in the Prospectus
regarding the effects of prepayments on the weighted average life of the
Contracts. In addition to the effects described in the Prospectus, the weighted
average maturity of the Notes will be reduced to the extent that sufficient
additional Motor Vehicle Contracts are not generated for purchase by the Trust
with the Prefunded Amount before the end of the Funding Period, because any
remaining Prefunded Amount will be included in the Principal Distribution made
to Noteholders on the Distribution Date at or immediately following the end of
the Funding Period, but in no event later than the _______, 199__ Distribution
Date. Although Onyx believes that sufficient additional Motor Vehicle Contracts
will be originated for purchase with the Prefunded Amount by the end of the
Funding Period, no assurances can be given in that regard. As the rate of
payment of principal of each class of Notes depends primarily on the rate of
payment (including prepayments) of the principal balance of the Contracts, final
payment of any class of Notes could occur significantly earlier than the
respective Final Scheduled Distribution Date for such class of Notes.
Noteholders will bear all reinvestment risk resulting from prepayment of the
Contracts. See "Risk Factors -- Maturity and Prepayment Considerations".
Onyx has limited historical experience with respect to prepayments,
has not as of the date hereof prepared data on prepayment rates, and is not
aware of publicly available industry statistics that set forth principal
prepayment experience for retail installment sales contracts similar to the
Contracts. Onyx can make no prediction as to the actual prepayment rates that
will be experienced on the Contracts in either stable or changing interest rate
environments. Note Owners will bear all reinvestment risk resulting from the
rate of prepayment of the Contracts.
YIELD CONSIDERATIONS
Although the Contracts have different APRs, the yield on each
individual Contract, using the Recomputed Yield for Rule of 78's Contracts, will
equal or exceed ____%. Therefore, disproportionate rates of prepayments between
Contracts with higher and lower APRs will not affect the yield to Noteholders.
S-18
<PAGE> 24
USE OF PROCEEDS
The net proceeds of the initial sale of the Notes will be used by the
Trust to purchase the Initial Contracts from the Seller pursuant to the Sale and
Servicing Agreement and to fund the deposits in the Prefunding Account, and
certain collateral accounts maintained for the benefit of the Insurer. The net
proceeds to be received by the Seller from the sale of the Contracts to the
Trust will be used by the Seller to repay certain indebtedness incurred in
connection with its acquisition of the Contracts and to pay certain other
expenses in connection with the pooling of the Contracts and the issuance of the
Notes.
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the terms of the Indenture, a
form of which will be filed with the Commission following the issuance of the
Notes. The following summaries of certain terms of the Notes and the Indenture
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, the provisions of the Notes and the Indenture. Where
particular provisions of or terms used in the Indenture are referred to, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summaries.
GENERAL
The Notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof, except that one Note may
be issued in a different denomination. The Notes will initially be represented
by one or more certificates registered in the name of Cede, as nominee of DTC,
except as set forth below. The interests of holders of beneficial interests in
the Notes (each a "NOTE OWNER") will be available for purchase in book-entry
form only. The Seller has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the holder of record of the Notes. Unless
and until Definitive Notes are issued under the limited circumstances described
herein, no Note Owner will be entitled to receive a certificate representing
such person's interest in the Notes. All references herein to actions by
Noteholders shall refer to actions taken by DTC upon instructions from its
participating organizations and all references herein to payments,
distributions, notices, reports and statements to Noteholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Notes, as the case may be, for distribution to Note Owners in
accordance with DTC procedures. See "Description of the Securities -- Book-Entry
Registration" and "--Definitive Securities" in the Prospectus.
PAYMENTS OF INTEREST AND PRINCIPAL
Interest on the principal balances of the classes of the Notes will
accrue during each Interest Accrual Period at the respective per annum Interest
Rates and will be payable to the Noteholders monthly on each related
Distribution Date commencing ______________, 199__. Interest on each class of
Notes will be calculated on the basis of a 360-day year of twelve 30-day months.
See "Description of the Transfer and Servicing Agreements -- Distributions"
herein.
On each Distribution Date, the Principal Distribution for the related
Collection Period will be paid to the Noteholders applied on each Distribution
Date, first, to the principal balance of the Class A-1 Notes until such
principal balance is reduced to zero, then second, to the principal balance of
the Class A-2 Notes until such principal balance is reduced to zero and then
third, to the principal balance of the Class A-3 Notes until such principal
balance is reduced to zero. In addition, the outstanding principal balance of
the Notes of any class, to the extent not previously paid, will be payable on
the respective Final Scheduled Distribution Date for such class. The actual date
on which the aggregate outstanding principal balance of any class of Notes is
paid may be earlier than the Final Scheduled Distribution Date for such class,
depending on a variety of factors.
The "PRINCIPAL DISTRIBUTION" on any Distribution Date is the
Aggregate Scheduled Balance Decline during the related Collection Period and,
with respect to the Distribution Date immediately on or following the last day
of the Funding Period, any portion of the Prefunded Amount remaining on deposit
in the Prefunding Account. The Principal Distribution on the Final Distribution
Date will include the Aggregate Scheduled Balance of all Contracts that are
outstanding at the end of the Collection Period immediately prior to the Final
Distribution Date. The "AGGREGATE SCHEDULED BALANCE DECLINE" for any
Distribution Date will be the sum of (x) the amount by which the Aggregate
Scheduled Balance of the Contracts as of the beginning of the related Collection
Period exceeds the Aggregate Scheduled
S-19
<PAGE> 25
Balance of such Contracts as of the end of the related Collection Period
(excluding any Contracts added as Subsequent Contracts during the related
Collection Period) and (y) the amount by which the Aggregate Scheduled Balance
of the Subsequent Contracts (determined as of each related Subsequent Transfer
Date) transferred to the Trust during the related Collection Period exceeds the
Aggregate Scheduled Balance of such Contracts as of the end of the related
Collection Period. The "AGGREGATE SCHEDULED BALANCE" of the Contracts is the sum
of the Scheduled Balances of each Contract. The "SCHEDULED BALANCE" of a Rule of
78's Contract at any date is equal to the Cut-Off Date Scheduled Balance of such
Contract reduced by the portion of each scheduled payment of principal and
interest due on such Contract (the "MONTHLY P&I") on or prior to the date of
calculation that is allocable to principal under the Recomputed Actuarial
Method. The Scheduled Balance of a Simple Interest Contract at any date is equal
to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of
Monthly P&I paid on or prior to the date of calculation that is allocated to
principal under the Simple Interest Method. The Scheduled Balance of any
Contract that is a Liquidated Contract or that has been purchased by the
Servicer or repurchased by the Seller will equal zero. A "LIQUIDATED CONTRACT"
is a Contract that (a) is the subject of a Full Prepayment, (b) is a Defaulted
Contract with respect to which Liquidation Proceeds constituting, in the
Servicer's reasonable judgment, the final amounts recoverable have been received
and deposited in the Collection Account, (c) is paid in full on or after its
Maturity Date or (d) has been a Defaulted Contract for four or more Collection
Periods and as to which Liquidation Proceeds have not been deposited in the
Collection Account; provided, however, that in any event a Contract that is
delinquent in the amount of five monthly installments of Monthly P&I at the end
of a Collection Period is a Liquidated Contract. A "DEFAULTED CONTRACT" with
respect to any Collection Period is a Contract (a) which is, at the end of such
Collection Period, delinquent in the amount of two monthly installments of
Monthly P&I or (b) with respect to which the related Financed Vehicle has been
repossessed or repossession efforts with respect to the related Financed Vehicle
have been commenced.
The Monthly P&I for a Contract due on each Due Date is substantially
equal for the term of the Contract. The Scheduled Balance of each Contract as of
the Cut-Off Date, which will be treated as being equal to the Cut-Off Date
Scheduled Balance, will be set forth in a schedule to the Agreement. The yield
of each Contract (using the Recomputed Yield for Rule of 78's Contracts) will at
least equal ____%.
At the issuance of the Notes, the initial aggregate principal amount
of the Notes will be approximately equal to the sum of the Aggregate Scheduled
Balance of all the Initial Contracts as of the Cut-Off Date plus the Prefunded
Amount.
In addition, on each Distribution Date through the Accelerated
Principal Termination Date, the Accelerated Principal Distribution for such
Distribution Date will be applied to make payments on the Class A-1 Notes until
the aggregate principal balance thereof is reduced to zero. The "ACCELERATED
PRINCIPAL DISTRIBUTION" with respect to a Distribution Date will equal the
lesser of (i) the sum of (x) the excess, if any, of the Available Funds with
respect to such Distribution Date over the amounts payable on such Payment Date
pursuant to clauses (i)-(vii) under "Description of the Transfer and Servicing
Agreements -- Distributions" herein plus (y) amounts, if any, available from the
Spread Account (as defined herein) in accordance with the Insurance Agreement
and (ii) the excess, if any, of (x) the product of (I) ___% and (II) the sum of
the Pool Balance and the Pre-Funded Amount as of the end of the preceding
Collection Period (such product, the "REQUIRED NOTE BALANCE" with respect to
such Distribution Date) over (y) the aggregate principal balance of the Notes on
such Distribution Date, after giving effect to the payments made pursuant to
clauses (i)-(v) under "Description of the Transfer and Servicing Agreements --
Distributions" herein (the "PRO FORMA NOTE BALANCE" with respect to such
Distribution Date). The requirement to pay Accelerated Principal Distributions
will terminate on the "ACCELERATED PAYMENT TERMINATION DATE," which is the later
to occur of (i) the first Distribution Date on which the related Pro Forma Note
Balance equals the related Required Note Balance and (ii) the Distribution Date
on which aggregate principal balance of the Class A-1 Notes is reduced to zero.
The Insurer will not guarantee payment of Accelerated Principal Distributions.
Unless and until Definitive Notes have been issued, distributions on
each Distribution Date will be made through the facilities of DTC and the
related "RECORD DATE" will be the Business Day prior to such Distribution Date.
If Definitive Notes are issued, the related "RECORD DATE" will be the last day
of the calendar month preceding such Distribution Date. The final distribution
of principal of and interest on each Note will be made only upon presentation
and surrender of such Note on or after the Final Distribution Date with respect
to the applicable class of Notes (or such earlier termination date as is
provided by the Agreement) at the office or agency of the Trustee maintained for
that purpose.
S-20
<PAGE> 26
THE PREFUNDING ACCOUNT; MANDATORY PARTIAL REDEMPTION OF THE NOTES
The Prefunding Account. The Servicer will establish an account in the
name of the Indenture Trustee for the benefit of the Noteholders into which the
Prefunded Amount (which equals $__________, or approximately __% of the Original
Pool Balance) will be deposited on the Closing Date from the net proceeds
received from the sale of the Notes and from which monies will be released
during the Funding Period to purchase Subsequent Contracts from the Seller (the
"PREFUNDING ACCOUNT"). The Funding Period will be the period from the Closing
Date until the earliest to occur of (i) the date on which the Prefunded Amount
is less than $_____, (ii) the date on which an Indenture Event of Default
occurs, or (iii) the close of business on ________, 199__.
The Prefunding Account will be an Eligible Account. An "ELIGIBLE
ACCOUNT" is (i) a trust account that is either (a) maintained by the Indenture
Trustee, (b) maintained with a depository institution or trust company the
commercial paper or other short-term debt obligations of which have credit
ratings from Standard & Poor's at least equal to "A-1" and from Moody's equal to
"P-1," which account is fully insured up to applicable limits by the Federal
Deposit Insurance Corporation or (c) maintained with a depository institution
acceptable to the Insurer or (ii) a general ledger account or deposit account at
a depository institution acceptable to the Insurer. The Prefunding Account will
be part of the Trust but monies on deposit therein will not be available to
cover losses on or in respect of the Contracts. Any portion of the Prefunded
Amount remaining on deposit in the Prefunding Account as of the end of the
Funding Period will be payable as described below as prepayment of principal to
the Noteholders. Monies on deposit in the Prefunding Account may be invested in
Eligible Investments in the manner described in the Agreement. Earnings on
investment of funds in the Prefunding Account will be used, together with the
Capitalized Interest Amount, to pay interest on the portion of the Notes
relating to the Prefunding Account. The Trust will not be required to register
under the Investment Company Act of 1940.
Upon each conveyance of Subsequent Contracts on each Subsequent
Transfer Date to the Trust, an amount equal to the purchase price paid by the
Seller to Onyx and any Selling Subsidiary for such Subsequent Contracts on the
related Subsequent Transfer Date will be released from the Prefunding Account
and paid to the Seller.
Mandatory Partial Redemption of the Notes. The Notes will be subject
to partial Mandatory Partial Redemption on the Distribution Date immediately at
or succeeding the date on which the Funding Period ends, to the extent that any
portion of the Prefunded Amount, exclusive of any investment earnings thereon,
remains on deposit in the Prefunding Account after giving effect to the purchase
by the Seller and conveyance to the Trust of any Subsequent Contracts on the
related Subsequent Transfer Dates, including any such purchase and conveyance on
the date on which the Funding Period ends.
Upon the occurrence of a Mandatory Partial Redemption, the aggregate
principal amount of each class of Notes to be redeemed will be an amount equal
to such class's pro rata share (based on the respective current principal
balance of each class of Notes) of the Prefunded Amount remaining at the end of
the Funding Period (such class's "NOTE REDEMPTION AMOUNT"); provided, that if
the remaining Prefunded Amount is $________ or less, such amount will be applied
exclusively to reduce the outstanding original balance of the class of Notes
then entitled to receive distributions of principal. It is anticipated that the
aggregate principal amount of Subsequent Contracts purchased by the Trust and
delivered to the Indenture Trustee during the Funding Period will not be exactly
equal to the Prefunded Amount and that therefore there will be at least a
nominal amount of principal prepaid to Noteholders.
OPTIONAL REDEMPTION
In order to avoid excessive administrative expense, the Seller or the
Servicer is permitted at its option to purchase the remaining Contracts from the
Trust on any Distribution Date as of which the Pool Balance (after giving effect
to the Principal Distribution otherwise to be made on such Distribution Date)
has declined to __% or less of the Original Pool Balance at a price equal to the
greater of (i) the sum of (x) the Aggregate Scheduled Balance of such Contracts
on the date of repurchase plus (y) accrued interest on such Contracts and (ii)
the sum of (x) the unpaid principal amount of the Class A-3 Notes, plus (y)
accrued and unpaid interest thereon, plus (z) all amounts due to the Insurer
under the Insurance Agreement. The Class A-3 Notes, to the extent still
outstanding, will be redeemed in whole, but not in part, on any Distribution
Date on which the Seller or the Servicer, or any successor to the Servicer,
exercises its option to purchase the remaining Contracts. The Trustee will give
written notice of termination to each Noteholder of record. The final payment to
any such Noteholder will be made only upon surrender and cancellation of such
Noteholder's Note at
S-21
<PAGE> 27
an office or agency of the Indenture Trustee specified in the notice of
termination. Any funds remaining in the Trust, after the Indenture Trustee has
taken certain measures to locate a Noteholder and such measures have failed,
will be distributed to a charity designated by the Servicer.
INDENTURE EVENTS OF DEFAULT
Unless an Insurer Default shall have occurred and be continuing,
"INDENTURE EVENTS OF DEFAULT" under the Indenture will consist of those events
defined in the Insurance and Reimbursement Agreement as Insurance Agreement
Indenture Cross Defaults, and will constitute an Indenture Event of Default only
if the Insurer shall have delivered to the Indenture Trustee, and not rescinded,
a written notice specifying that any such Insurance Agreement Indenture Cross
Default constitutes an Indenture Event of Default. "INSURANCE AGREEMENT
INDENTURE CROSS DEFAULTS" consist of: (i) a demand for payment being made under
the Financial Guarantee Insurance Policy; (ii) certain events of bankruptcy,
insolvency, receivership or liquidation of the Trust; (iii) the Trust becoming
taxable as an association (or publicly traded partnership) taxable as a
corporation for federal or state income tax purposes; (iv) on any Servicer
Report Date with respect to any Distribution Date, the Available Funds (as
defined herein) with respect to such Distribution Date, plus amounts available
from the Spread Account (as defined herein) in accordance with the Insurance
Agreement are less than the sum of the amounts described in clauses (i)-(vi)
under "Description of the Transfer and Serving Agreements-- Distributions"
herein for such Distribution Date; and (v) any failure of the Trust to observe
or perform in any material respect any other covenants or agreements in the
Indenture, or any representation or warranty of the Trust made in the Indenture
or in any certificate or other writing delivered pursuant thereto or in
connection therewith proving to have been incorrect in any material respect when
made, and such failure continuing or not being cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was incorrect
not having been eliminated or otherwise cured, for 30 days after the giving of
written notice of such failure or incorrect representation or warranty to the
Trust and the Indenture Trustee by the Insurer.
Upon the occurrence of an Indenture Event of Default, so long as an
Insurer Default shall not have occurred and be continuing, the Insurer will have
the right, but not the obligation, to cause the Indenture Trustee to liquidate
the Trust Property in whole or in part, on any date or dates following the
acceleration of the Notes due to such Indenture Event of Default as the Insurer,
in its sole discretion, shall elect. The Insurer may not, however, cause the
Indenture Trustee to liquidate the Trust Property in whole or in part if the
proceeds of such liquidation would not be sufficient to pay all outstanding
principal of and accrued interest on the Notes, unless such Indenture Event of
Default arose from a claim being made on the Financial Guarantee Insurance
Policy or from certain events of bankruptcy, insolvency, receivership or
liquidation of the Trust. Following the occurrence of any Indenture Event of
Default, the Indenture Trustee and the Owner Trustee will continue to submit
claims under the Financial Guarantee Insurance Policy for any shortfalls in
amounts available to make required payments on the Notes. Following any
Indenture Event of Default, the Insurer may elect to pay all or any portion of
the outstanding amount of the Notes, plus accrued interest thereon. See
"Description of the Notes -- The Financial Guarantee Insurance Policy" herein.
"INSURER DEFAULT" shall mean the occurrence and continuance of any of
the following events:
(a) the Insurer shall have failed to make a payment required under
the Financial Guarantee Insurance Policy in accordance with its terms;
(b) the Insurer shall have (i) filed a petition or commenced any case
or proceeding under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (ii) made a general
assignment for the benefit of its creditors, or (iii) had an order for relief
entered against it under the United States Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
S-22
<PAGE> 28
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a final and
nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Insurer (or the taking of possession of all or any
material portion of the property of the Insurer).
CAPITALIZED INTEREST ACCOUNT
Pursuant to the Indenture, the Seller will be obligated to pay the
Capitalized Interest Amount, if any, on or before five business days prior to
each Distribution Date, ending with the _______, 199_ Distribution Date, for the
purpose of covering the shortfall between interest payable on the portion of the
Notes represented by the Prefunded Amount and interest which will be earned by
the Trust on the Prefunded Amount prior to the time it is used to purchase
Subsequent Contracts. Payments of the Capitalized Interest Amounts will be
secured by funds on deposit in a segregated trust deposit account (the
"CAPITALIZED INTEREST ACCOUNT") established in the name of the Indenture
Trustee. The Capitalized Interest Account will be an Eligible Account. Monies on
deposit in the Capitalized Interest Account may be invested in Eligible
Investments in the manner described in the Indenture.
The amount required to be deposited in such Capitalized Interest
Account on the Closing Date will be the maximum aggregate Capitalized Interest
Amounts that may become owing under the Indenture, assuming that, with respect
to the Prefunded Amount during the Funding Period, a certain rate of interest
(set forth in the Agreement) is earned and no Subsequent Contracts are acquired.
The "CAPITALIZED INTEREST AMOUNT," with respect to any Distribution Date for any
Collection Period up through the last Collection Period in the Funding Period,
is an amount equal to (a) one month's interest on the Prefunded Amount on
deposit in the Prefunding Account as of the first day of such Collection Period
at the weighted average Interest Rate of the Notes plus (b) one-twelfth of the
premium for the Financial Guarantee Insurance Policy on the Prefunded Amount
minus (c) the earnings received by the Indenture Trustee during the related
Collection Period from investment of the Prefunded Amount on deposit in the
Prefunding Account. On each Subsequent Closing Date, an amount will be released
to the Seller from the Capitalized Interest Account so that the amount remaining
in the account after such release will equal the maximum Capitalized Interest
Amount which could become owing during the remainder of the Funding Period
assuming that no additional Subsequent Contracts are conveyed to the Trust. Any
amounts remaining on deposit in the Capitalized Interest Account after giving
effect to the payment on the Notes on the ________, 199__ Distribution Date will
be released to the Seller on such date.
THE FINANCIAL GUARANTEE INSURANCE POLICY
If on any Servicer Report Date with respect to any Distribution Date
the Available Funds with respect to such Distribution Date are less than the sum
of the Servicing Fee, accrued interest with respect to each class of Notes and
the Principal Distribution for such Distribution Date, the Indenture Trustee, by
delivering a notice in accordance with the Financial Guarantee Insurance Policy
shall demand payment under the Financial Guarantee Insurance Policy in an amount
equal to such deficiency. The Insurer shall pay or cause to be paid such amount
to the Indenture Trustee for credit to the Collection Account. The Indenture
Trustee shall withdraw from the Collection Account and shall pay such amount to
the Noteholders on the related Distribution Date.
If on the Business Day preceding the Final Scheduled Distribution
Date for any class of Notes, any principal amount of such class of Notes is
still outstanding, then the Indenture Trustee shall demand payment on the
Financial Guarantee Insurance Policy in an amount equal to the amount by which
the outstanding principal amount of such class of Notes, plus interest thereon
at the Interest Rate applicable to such class, exceeds the amount that will be
deposited in the Collection Account and will be available to make payments of
interest and principal on each class of Notes on such Final Scheduled
Distribution Date. The Insurer shall pay or cause to be paid such amount to the
Indenture Trustee pursuant to the Indenture Trustee's instructions for credit to
the Collection Account and on the applicable Final Scheduled Distribution Date,
the Indenture Trustee shall withdraw from the Collection Account and shall pay
such amount to the Noteholders of the applicable class.
S-23
<PAGE> 29
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and
Servicing Agreement and the Trust Agreement (collectively, the "TRANSFER AND
SERVICING AGREEMENTS"). Forms of the Transfer and Servicing Agreements will be
filed with the Commission following the issuance of the Notes. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Transfer
and Servicing Agreements set forth under the headings "Description of the
Transfer and Servicing Agreements" in the Prospectus, to which description
reference is hereby made.
SALE AND ASSIGNMENT OF THE CONTRACTS
At the time of issuance of the Notes, the Seller will sell and assign
to the Trust, without recourse, the Seller's entire interest in the Initial
Contracts and the proceeds thereof, including its security interests in the
Initial Financed Vehicles. Concurrently with the sale and assignment of the
Initial Contracts, the Seller will sell and assign to the Trust, against payment
therefor from the Prefunded Amount, all of the Seller's interest in the
Subsequent Contracts thereafter created and delivered to the Trust. Each Initial
Contract will be identified in a schedule appearing as an exhibit to the
Agreement. Concurrently with such sale and assignment, the Trust will pledge the
assets acquired by it to the Indenture Trustee pursuant to the Indenture, and
the Indenture Trustee will execute, authenticate and deliver the definitive
certificates representing the Notes to the Underwriters against payment to the
Seller of the net purchase price of the sale of the Notes. Pursuant to the
applicable respective Purchase Agreements, prior to sale of the Initial
Contracts to the Trust and the issuance of the Notes, Onyx and each Selling
Subsidiary will sell and assign to the Seller Onyx's and such Selling
Subsidiaries' entire interest in the Initial Contracts. The Trustee will pledge
its rights under the Agreement to the Indenture Trustee as collateral for the
Notes, and such rights may be enforced directly by the Indenture Trustee.
During the Funding Period, pursuant to the applicable Purchase
Agreement, Onyx and/or one or more Selling Subsidiaries will sell and the Seller
will purchase, Subsequent Contracts. On each Subsequent Transfer Date, Onyx
and/or one or more Selling Subsidiaries will sell and assign to the Seller,
without recourse, its entire right, title and interest in and to Subsequent
Contracts, including its security interest in the Subsequent Financed Vehicles.
The purchase price to be paid to Onyx or any such Selling Subsidiary for each
Subsequent Contract will equal the principal balance thereof as of the related
Subsequent Transfer Date. Pursuant to the Agreement, the Seller will in turn
sell the Subsequent Contracts to the Trust and pursuant to the Indenture, the
Trust will in turn pledge the Subsequent Contracts to the Indenture Trustee.
Each Subsequent Contract will be sold to the Trust within two Business Days of
its acquisition by Onyx. In connection with each purchase of Subsequent
Contracts, the Trust will be required to pay to the Seller an amount equal to
the amount paid by the Seller to Onyx or any such Selling Subsidiary for such
Subsequent Contracts, which purchase price will be paid from monies on deposit
in the Prefunding Account. Each Subsequent Contract delivered to the Trust on
each Subsequent Transfer Date will be accompanied by a certificate of the Seller
(a "TRANSFER CERTIFICATE") setting forth the aggregate principal balance of the
related Subsequent Contracts, the aggregate principal balance of the Subsequent
Contracts delivered to the Trust during the Funding Period up to and including
such Subsequent Transfer Date and an affirmation of the representations and
warranties set forth in the Agreement with respect to the Seller and such
Subsequent Contracts. Upon the conveyance of Subsequent Contracts to the Trust
and the pledge thereof to the Indenture Trustee on a Subsequent Transfer Date,
the Pool Balance will increase in an amount equal to the aggregate Cut-Off Date
Scheduled Balance of such Subsequent Contracts as of the related Subsequent
Transfer Date.
Each conveyance of Subsequent Contracts will be subject to the
following conditions, among others: (i) such Subsequent Contracts must satisfy
the Eligibility Requirements; (ii) such Subsequent Contracts were not selected
by Onyx or the Seller in a manner that either believes is adverse to the
interests of the Noteholders or the Insurer; (iii) the weighted average APR of
the Contracts (after giving effect to the purchase of the related Subsequent
Contracts) is not less than ____%; (iv) the weighted average remaining term of
the Contracts (including the Subsequent Contracts) as of the related Subsequent
Transfer Date will not be greater than __ months; and (v) the Seller and the
Owner Trustee shall not have been advised by either Rating Agency that the
conveyance of such Subsequent Contracts will result in a qualification,
modification or withdrawal of its then current rating of the Notes.
S-24
<PAGE> 30
On the Business Day preceding each Distribution Date during and
immediately following the Funding Period (each such date a "SUBSEQUENT CLOSING
DATE") UCC-1 financing statements will be filed naming the Seller as seller and
the Indenture Trustee as the purchaser with respect to the Subsequent Contracts
delivered to the Owner Trustee since the preceding Subsequent Closing Date (or
the Closing Date, in the case of the first Subsequent Closing Date) and all
legal opinions, officers' certificates and other documentation necessary with
respect to the Subsequent Contracts delivered to the Indenture Trustee since the
preceding Subsequent Closing Date (or the Closing Date, as the case may be) will
be executed and delivered. Failure to comply with any of the conditions set
forth in the Agreement with respect to a Subsequent Closing Date will be deemed
to be a breach of a representation and warranty with respect to the Subsequent
Contracts to which such Subsequent Closing Date relates and accordingly the
Seller will be obligated to repurchase such Subsequent Contracts from the Trust
as described below.
Because the Subsequent Contracts will be originated after the Initial
Contracts, following their conveyance to the Trust, the characteristics of the
Contracts, including the Subsequent Contracts, may vary from those of the
Initial Contracts.
DISTRIBUTIONS
Subject to the last sentence of this paragraph, payments on the Notes
generally will be made on each Distribution Date by the Indenture Trustee out of
net collections on the Contracts (exclusive of amounts representing payments due
in the Collection Period in which such Distribution Date occurs and any future
Collection Periods) for the Collection Period preceding such Distribution Date
plus amounts payable from the Payahead Account, the Prefunding Account and the
Capitalized Interest Account (collectively, the "AVAILABLE FUNDS"). On or prior
to each Distribution Date, the Servicer is required to instruct the Indenture
Trustee to make the following payments in the following order of priority
(provided, however, that any portion of the Prefunded Amount to be applied to
make a Mandatory Partial Redemption shall be applied exclusively to make such
Mandatory Partial Redemption as described under "Description of the Notes -- The
Prefunding Account; Mandatory Partial Redemption of the Notes" herein):
(i) from the Available Funds, to the Servicer, the Servicing
Fee;
(ii) from the Available Funds, to the holders of each class of
Notes, the interest accrued on each class of Notes during
the related Collection Period, on a pro rata basis based
on the interest accrued on each class of Notes;
(iii) from the Available Funds, to the holders of Class A-1
Notes, the Principal Distribution, until the aggregate
principal balance of the Class A-1 Notes is reduced to
zero;
(iv) from the Available Funds, to the holders of Class A-2
Notes, the remaining Principal Distribution (after giving
effect to the payment to the holders of Class A-1 Notes
described in clause (iii) above), until the aggregate
principal balance of the Class A-2 Notes is reduced to
zero;
(v) from the Available Funds, to the holders of Class A-3
Notes, the remaining Principal Distribution (after giving
effect to the payment to the holders of Class A-1 Notes
and Class A-2 Notes described in clauses (iii) and (iv)
above), until the aggregate principal balance of the Class
A-3 Notes is reduced to zero;
(vi) from the Available Funds, to the Insurer, any amounts
owing to the Insurer under the Insurance Agreement;
(vii) from the Available Funds, to a spread account established
pursuant to the Insurance Agreement (the "SPREAD
ACCOUNT"), the amount, if any, required to increase the
amount therein to its required level;
(viii) on each Distribution Date through the Accelerated
Principal Termination Date, from the Available Funds and
together with amounts, if any, available from the Spread
Account to make such payment in accordance with the
Insurance Agreement, to the holders of the Class A-1
Notes, the Accelerated Principal Distribution, until the
aggregate principal balance of the Class A-1 Notes is
reduced to zero; and
S-25
<PAGE> 31
(ix) any remaining amount of Available Funds to, the Spread
Account to be applied in accordance with the Insurance
Agreement, which provides that to the extent funds are not
required to reimburse the Insurer for draws on the
Financial Guarantee Insurance Policy, to satisfy
obligations owing to the Insurer or to reserve against the
possibility of future draws, amounts remaining shall be
released to the beneficiaries of the Trust.
If the Notes are accelerated following an Indenture Event of Default under the
Indenture, amounts collected will be applied first, to pay any unpaid Servicing
Fee; second, to pay accrued interest on each class of Notes on a pro rata basis
based on the interest accrued on each class of Notes; third, to pay principal on
each class of Notes, on a pro rata basis based on the aggregate principal
balance of each class of Notes, until the aggregate principal balance of each
class of Notes is reduced to zero; and fourth, to the Spread Account, to be
applied in accordance with the Insurance Agreement.
Any amounts distributed pursuant to clause (vii) of the second
preceding paragraph will not be available to make payments to the Noteholders on
the current or any future Distribution Date. Under the Financial Guarantee
Insurance Policy, the Insurer is obligated to provide for payment to the
Indenture Trustee on each Distribution Date of the amount, if any, by which
Available Funds with respect to such Distribution Date are less than the sum of
the Servicing Fee, accrued interest with respect to each class of Notes and the
Principal Distribution for such Distribution Date. In addition, on the Final
Scheduled Distribution Date with respect to each class of Notes, to the extent
the amount that will be on deposit in the Collection Account and will be
available to make payments of interest and principal on such class of Notes is
less than all remaining unpaid interest and principal on the Notes, the Insurer
is obligated to pay under the Financial Guarantee Insurance Policy or cause to
be paid the amount of such shortfall. See "Description of the Notes -- Payments
of Interest" and "--Payments of Principal" herein.
SERVICING FEE
The Servicer will be entitled to compensation for the performance of
its obligations under the Agreement. The Servicer shall be entitled to receive
on each Distribution Date an amount equal to the product of one-twelfth of ____%
per annum (the "SERVICING FEE RATE") multiplied by the Pool Balance (excluding
the Prefunded Amount) as of the end of the Collection Period preceding the
related Collection Period. As additional compensation, the Servicer or its
designee shall be entitled to retain all late payment charges, extension fees
and similar items paid in respect of the Contracts. The Servicer or its designee
will also receive as servicing compensation reinvestment earnings on Eligible
Investments (other than earnings on amounts on deposit in the Prefunding
Account) and the amount, if any, by which the outstanding principal balance
based on the Rule of 78's of a Contract that is subject to a Full Prepayment
exceeds the Scheduled Balance of such Contract. The Servicer shall pay all
expenses incurred by it in connection with its servicing activities under the
Agreement and shall not be entitled to reimbursement of such expenses except to
the extent they constitute Liquidation Expenses or expenses recoverable under an
applicable insurance policy.
The Sale and Servicing Agreement requires the Servicer to use its
best efforts to collect all payments called for under the terms and provisions
of the Contracts. The Servicer, consistent with the foregoing, will be
permitted, in its discretion, to waive certain changes and grant extensions as
described under "Description of the Transfer and Servicing Agreements - Waivers
and Extensions" in the Prospectus. The maturity date of a Contract, however, may
not be extended more than ____ days past the originally scheduled maturity date,
and in no event beyond the Class A-3 Final Scheduled Distribution Date.
DESCRIPTION OF THE INSURER
The following information with respect to the Insurer has been
furnished by the Insurer and none of Onyx, the Seller or the Underwriters have
made any independent investigation of such information.
The Insurer is domiciled in the State of _______ and licensed to do
business in and subject to regulation under the laws of all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
S-26
<PAGE> 32
Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. State laws regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by the Insurer,
changes in control and transactions among affiliates. Additionally, the Insurer
is required to maintain contingency reserves on its liabilities in certain
amounts and for certain periods of time.
As of December 31, 199_ the Insurer had admitted assets of $______
(audited), total liabilities of $______ (audited), and total capital and surplus
of $_______ (audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. As of
September 30, 199_, the Insurer had admitted assets of $_____ billion
(unaudited), total liabilities of $________ (unaudited), and total capital and
surplus of $________ (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities.
Furthermore, copies of the Insurer's year end financial statements
prepared in accordance with statutory accounting practices are available without
charge from the Insurer. A copy of the Annual Report on Form 10-K of the Company
is available from the Insurer or the Securities and Exchange Commission. The
address of the Insurer is ___________________. The telephone number of the
Insurer is __________.
The Financial Guarantee Insurance Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
Moody's rates the claims paying ability of the Insurer "____."
___________ rates the claims paying ability of the Insurer "____." Each such
rating of the Insurer should be evaluated independently. The ratings reflect the
respective rating agency's current assessment of the creditworthiness of the
Insurer and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Notes, and such ratings may be subject to revision or withdrawal at any time by
the rating agencies. Any downward revision or withdrawal of any of the above
ratings may have an adverse effect on the market price of the Notes. The Insurer
does not guaranty the market price of the Notes nor does it guaranty that the
ratings on the Notes will not be revised or withdrawn.
Audited financial statements of the Insurer as of December 31, 199__
and 199__ and for each of the three years in the period ended December 31, 199__
are included in this Prospectus Supplement beginning at F-1. Unaudited financial
statements of the Insurer for the nine-month periods ended September 30, 199_
and September 30, 199_ are included in this Prospectus beginning at F-__. Such
financial statements have been prepared on the basis of generally accepted
accounting principles. Copies of the Insurer's 199_ year-end audited financial
statements prepared in accordance with statutory accounting practices are
available from the Insurer.
STATEMENTS TO NOTEHOLDERS
On each Distribution Date, the Indenture Trustee will include with
each distribution to each Noteholder the Distribution Date Statement setting
forth for such Distribution Date the information described under "Description of
the Securities -- Statements to Securityholders" in the Prospectus and the
following information:
(i) during the Funding Period, the Aggregate Scheduled Balance
of Subsequent Contracts transferred to the Trust during
such Collection Period;
(ii) during the Funding Period, the remaining amount on
deposit, if any, in the Prefunding Account, after giving
effect to (i) above;
(iii) at the end of the Funding Period, the amount of the
Mandatory Partial Redemption; and
(iv) the amount, if any, required from the Insurer pursuant to
the Financial Guarantee Insurance Policy to pay any
shortfall in the amount available in the Collection
Account for payment.
S-27
<PAGE> 33
CERTAIN MATTERS RELATING TO INSURER
Notwithstanding any provision in the Prospectus to the contrary, in
the event an Insurer Default shall have occurred and be continuing, the Insurer
shall not have the right to take any action under the Agreement or the
Indenture, to terminate the Servicer, or to control or direct the actions of the
Seller, the Servicer or the Indenture Trustee pursuant to the terms of the
Agreement or the Indenture, nor shall the consent of the Insurer be required
with respect to any action (or waiver of a right to take action) to be taken by
the Seller, the Servicer, the Indenture Trustee or the Noteholders; provided,
that the consent of the Insurer shall be required at all times with respect to
any amendment of the Agreement or the Indenture.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the Prospectus, the Notes may be purchased by an employee
benefit plan or an individual retirement account (a "BENEFIT PLAN") subject to
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"CODE"). A fiduciary of a Benefit Plan must determine that the purchase of a
Note is consistent with its fiduciary duties under ERISA and does not result in
a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code.
The Notes may not be purchased with the assets of a Benefit Plan if
the Seller, the Servicer, the Indenture Trustee, the Owner Trustee or any of
their affiliates (a) has investment or administrative discretion with respect to
such Benefit Plan assets; (b) has authority or responsibility to give, or
regularly gives, investment advice with respect to such Benefit Plan assets, for
a fee and pursuant to an agreement or understanding that such advice (i) will
serve as a primary basis for investment decisions with respect to such Benefit
Plan assets and (ii) will be based on the particular investment needs for such
Benefit Plan; or (c) is an employer maintaining or contributing to such Plan.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated _________, 199__ (the "UNDERWRITING AGREEMENT") between the
Seller and the Underwriters named below (the "UNDERWRITERS"), the Seller has
agreed to cause the Trust to sell to each of the Underwriters, and each of the
Underwriters has severally agreed to purchase, the principal amount of the Notes
set forth opposite its name in the table below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
----------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ $ $
$ $ $
Total....................... $ $ $
================= ================== =====================
</TABLE>
The Seller has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the prices set forth herein, and
to certain dealers at such price less the initial concession not in excess of
___% of the denominations of the Notes per Class A-1 Note, ___% per Class A-2
Note and ___% per Class A-3 Note. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of ___% per Class A-1 Note, ___% per
Class A-2 Note and ___% per Class A-3 Note to certain other dealers. After the
initial public offering of the Notes, the public offering price and such
concessions may be changed. The Underwriters are obligated to purchase and pay
for all of the Notes if any Notes are purchased. The Underwriters currently
intend, but are not obligated, to make a market in the Notes.
The Seller and Onyx have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under applicable securities laws, or
contribute to payments the Underwriters may be required to make in respect
thereof.
S-28
<PAGE> 34
LEGAL MATTERS
Certain matters with respect to the legality of the Notes and with
respect to the federal income tax matters discussed under "Certain Federal
Income Tax Consequences" in the Prospectus will be passed upon for the Seller by
Andrews & Kurth L.L.P., Dallas, Texas. Certain legal matters with respect to the
Notes will be passed upon for the Underwriters by ___________________________.
Certain legal matters relating to the Financial Guarantee Insurance Policy will
be passed upon for the Insurer by _________________________.
EXPERTS
The consolidated financial statements of _____________________ and
subsidiaries as of December 31, 199_ and 199_ and for each of the years in the
three-year period ended December 31, 199_ are included herein beginning on
page F-1 and have been audited by _____________, independent certified public
accountants, as set forth in their report thereon and are included in reliance
upon the authority of such firm as experts in accounting and auditing.
S-29
<PAGE> 35
INDEX OF TERMS
<TABLE>
<S> <C>
"Accelerated Principal Distribution"...........................................................................S-4, S-20
"Aggregate Scheduled Balance Decline"..........................................................................S-3, S-19
"Aggregate Scheduled Balance"..................................................................................S-3, S-20
"Agreement" .........................................................................................................S-8
"Available Funds" ..................................................................................................S-25
"Benefit Plan" .....................................................................................................S-28
"Business Day" ......................................................................................................S-2
"Capitalized Interest Account".................................................................................S-7, S-23
"Cede" .............................................................................................................S-10
"Class A-1 Notes" .....................................................................................................i
"Class A-1 Rate" ....................................................................................................S-3
"Class A-2 Final Scheduled Distribution Date"........................................................................S-2
"Class A-2 Notes" .....................................................................................................i
"Class A-2 Rate" ....................................................................................................S-3
"Class A-3 Final Scheduled Distribution Date"........................................................................S-2
"Class A-3 Notes" ....................................................................................................ii
"Class A-3 Rate" ....................................................................................................S-3
"Closing Date" ......................................................................................................S-5
"Code" .............................................................................................................S-28
"Collection Period" ................................................................................................ S-2
"Commission" ........................................................................................................iii
"Company" ...........................................................................................................S-1
"Contracts" .....................................................................................................ii, S-2
"Cut-Off Date" .....................................................................................................S-ii
"Defaulted Contract" ..........................................................................................S-4, S-20
"Distribution Date" .............................................................................................ii, S-2
"DTC" ...........................................................................................................i, S-10
"Eligibility Requirements"..........................................................................................S-16
"Eligible Account" .................................................................................................S-21
"ERISA" .............................................................................................................S-9
"Exchange Act" ......................................................................................................iii
"Final Scheduled Distribution Date"..................................................................................S-3
"Financed Vehicles" .............................................................................................ii, S-2
"Financial Guarantee Insurance Policy"...........................................................................ii, S-2
"Funding Period" ....................................................................................................S-5
"Indenture Events of Default"..................................................................................S-6, S-22
"Indenture Trustee" .................................................................................................S-1
"Indenture" .........................................................................................................S-1
"Initial Contracts" .................................................................................................S-1
"Initial Financed Vehicles"..........................................................................................S-1
"Initial Pool Balance"...............................................................................................S-5
"Insurance Agreement Indenture Cross Defaults"......................................................................S-22
"Insurance Agreement"................................................................................................S-7
"Insurer Default" ..................................................................................................S-22
"Insurer" .......................................................................................................ii, S-2
"Interest Accrual Period"............................................................................................S-3
"Interest Rates" ....................................................................................................S-3
"Issuer" ............................................................................................................S-1
"Liquidated Contract"..........................................................................................S-4, S-20
"Mandatory Partial Redemption".......................................................................................S-6
"Mandatory Redemption Date"..........................................................................................S-6
"Monthly P&I" .................................................................................................S-4, S-20
"Motor Vehicle Contracts"...........................................................................................S-14
"Note Owner" .................................................................................................S-10, S-19
"Note Redemption Amount".......................................................................................S-6, S-21
"Notes" .........................................................................................................ii, S-1
"Obligor" ..........................................................................................................S-12
</TABLE>
S-30
<PAGE> 36
<TABLE>
<S> <C>
"Onyx" ...................................................................................................ii, S-1
"Original Pool Balance".......................................................................................S-5
"Owner Trustee"............................................................................................i, S-1
"Payaheads"...................................................................................................S-9
"Prefunded Amount"............................................................................................S-5
"Prefunding Account" ...................................................................................S-2, S-21
"Principal Distribution"................................................................................S-3, S-19
"Pro Forma Note Balance"................................................................................S-4, S-20
"Record Date" .............................................................................................. S-20
"Required Note Balance".................................................................................S-4, S-20
"Rule of 78's Contracts"................................................................................S-8, S-16
"Scheduled Balance" ....................................................................................S-4, S-20
"Seller" ..................................................................................................i, S-1
"Selling Subsidiary" ........................................................................................S-16
"Servicer Report Date"........................................................................................S-7
"Servicer" ....................................................................................................ii
"Servicing Fee Rate" ...................................................................................S-8, S-26
"Servicing Fee" ..............................................................................................S-8
"Simple Interest Contracts".............................................................................S-8, S-16
"Spread Account" ............................................................................................S-25
"Subsequent Closing Date"...............................................................................S-8, S-25
"Subsequent Contracts"....................................................................................ii, S-2
"Subsequent Financed Vehicles"............................................................................ii, S-2
"Subsequent Transfer Date"....................................................................................S-2
"Tax Counsel" ................................................................................................S-9
"Transfer and Servicing Agreements"..........................................................................S-24
"Transfer Certificate".......................................................................................S-24
"Trust Agreement" ............................................................................................S-1
"Trust Property" .............................................................................................S-1
"Trust" ...................................................................................................i, S-1
"Underwriters" ..............................................................................................S-28
"Underwriting Agreement".....................................................................................S-28
</TABLE>
S-31
<PAGE> 37
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus Supplement and the accompanying Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus dated _________, 1998)
LOGO
$____________
ONYX ACCEPTANCE GRANTOR TRUST 199_-_
____% AUTO LOAN PASS-THROUGH CERTIFICATES, SERIES 199_-_
ONYX ACCEPTANCE FINANCIAL CORPORATION,
Seller
ONYX ACCEPTANCE CORPORATION,
Servicer
The ____% Auto Loan Pass-Through Certificates (the "CERTIFICATES")
will represent undivided fractional interests in the Onyx Acceptance Grantor
Trust 199_-_ (the "TRUST") to be formed by Onyx Acceptance Financial Corporation
(the "SELLER"), a wholly-owned, limited purpose finance subsidiary of Onyx
Acceptance Corporation ("ONYX"). The Trust property will include a pool of fixed
rate Rule of 78's and Simple Interest Method motor vehicle retail installment
sales contracts (the "CONTRACTS") secured by new and used automobiles and
light-duty trucks (the "FINANCED VEHICLES"), certain monies due under certain
Contracts on or after _____, 199_ (the "CUT-OFF DATE"), security interests in
the Financed Vehicles, the benefits of a financial guarantee insurance policy
(the "FINANCIAL GUARANTEE INSURANCE POLICY") issued by _______________ (the
"INSURER"), amounts on deposit in the Prefunding Account described herein, a
security interest in amounts on deposit in the Capitalized Interest Account
described herein, and certain other property, all as more fully described
herein. The initial Aggregate Scheduled Balance (as defined herein) of the
Initial Contracts as of the Cut-Off Date was $__________. From time to time on
or before _______, 199_, the Prefunded Amount will be used for purchase by the
Trust of additional Rule of 78's and Simple Interest Method contracts (the
"SUBSEQUENT CONTRACTS" and together with the Initial Contracts, the "CONTRACTS")
secured by new and used automobiles and light duty trucks (the "SUBSEQUENT
FINANCED VEHICLES" and, together with the Initial Financed Vehicles, the
"FINANCED VEHICLES"). Onyx will act as servicer of the Contracts (the
"SERVICER").
(continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" COMMENCING ON PAGE S-10 HEREOF AND PAGE 6 OF THE ACCOMPANYING
PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN
THE TRUST AND ARE NOT INSURED OR
GUARANTEED BY THE SELLER, ONYX OR ANY OF
THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT SELLER(1)(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Certificate....................... ____% ____% ____%
Total................................. $_______ $______ $_______
================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, calculated from _____, 199_.
(2) Before deducting expenses payable by the Seller estimated to be $______.
The Certificates are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to various prior conditions, including their right to reject orders in whole or
in part. It is expected that the Certificates will be delivered in book-entry
form, on or about _______, 199_, through the facilities of The Depository Trust
Company ("DTC").
[UNDERWRITERS]
The date of this Prospectus Supplement is ______, 199_.
<PAGE> 38
(continued from previous page)
Interest on the Certificates at the Pass-Through Rate of ____% per
annum (each, an "INTEREST DISTRIBUTION"), will be distributed to the
Certificateholders on the 15th day of each month (or, if the 15th day is not a
Business Day, the following Business Day) (each, a "DISTRIBUTION DATE")
commencing _____ 15, 199_ and ending on _____ 15, 200_ (the "FINAL DISTRIBUTION
DATE"). Payments of principal, as well as the principal balance of liquidated
contracts and contracts repurchased by the Seller and purchased by the Servicer
(the "PRINCIPAL DISTRIBUTION"), will be distributed to Certificateholders on
each Distribution Date as described herein. In addition, the Principal
Distribution on the Distribution Date immediately following the end of the
Funding Period, which shall occur on or before _______, 199__, will include any
portion of the Prefunded Amount remaining on deposit in the Prefunding Account.
It is a condition of issuance that the Certificates be rated in the
highest category by two nationally recognized rating agencies. Such ratings will
be based primarily on the issuance of the Financial Guarantee Insurance Policy
by the Insurer. Under the Financial Guarantee Insurance Policy, the Insurer has
unconditionally and irrevocably guaranteed payment of the Interest Distribution
and the Principal Distribution on each Distribution Date, including the Final
Distribution Date. See "The Certificates and the Agreement -- The Financial
Guarantee Insurance Policy" herein.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
CERTIFICATES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH CERTIFICATES, AND THE IMPOSITION OF PENALTY BIDS, DURING
AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
AVAILABLE INFORMATION
The Seller, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission (the "COMMISSION") with respect to the Certificates offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information included in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement and amendments thereof and to
the exhibits thereto, which are available for inspection without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of which may be obtained from the Commission at
prescribed rates. The Commission also maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the Servicer
and the Trust, and the address is http://www.sec.gov. The Servicer, on behalf of
the Trust, will also file or cause to be filed with the Commission such periodic
reports as are required under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and the rules and regulations of the Commission thereunder,
and such reports can be obtained as described above. Such reports will include
Current Reports on Form 8-K filed after each Distribution Date, and an Annual
Report on Form 10-K. Such reports will contain certain financial information
regarding the Trust, including the Distribution Date Statement which will be
furnished monthly to Certificateholders as described under "Reports to
Certificateholders" below. Reports on Form 8-K and Form 10-K will not be filed
for any period which ends after _________, 199_; however, the Certificateholders
will continue to receive the Distribution Date Statement monthly, as described
below.
-ii-
<PAGE> 39
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued (which will occur
under the limited circumstances described herein and in the Prospectus), the
unaudited monthly and annual reports concerning the Trust which are described in
the Prospectus under "Certain Information Regarding the Securities -- Statements
to Securityholders" in the Prospectus and are prepared by the Servicer, will be
sent by the Trustee only to Cede & Co. as the nominee of DTC and the registered
holder of the Certificates. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
These reports may be obtained by Certificate Owners by a request in writing to
the Trustee. See "Description of the Securities -- Book-Entry Registration" in
the Prospectus. None of the Seller, the Servicer or the Insurer intends to send
any of its financial reports to the Certificateholders.
-iii-
<PAGE> 40
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere herein and in the Prospectus.
Certain capitalized terms used in this Summary are defined elsewhere in this
Prospectus. See the Index of Terms for the location herein of the definitions of
certain capitalized terms or, to the extent not defined herein, the definition
assigned to such terms in the Prospectus. An investment in the Certificates
involves various risks, and potential purchasers should carefully consider the
matters discussed under "Risk Factors" herein and in the Prospectus in
considering an investment in the Certificates.
ISSUER..................... Onyx Acceptance Grantor Trust 199_-_ (the
"TRUST"), to be formed by Onyx Acceptance
Financial Corporation (the "SELLER") pursuant to
the Pooling and Servicing Agreement, to be dated
as of ______, 199_ (the "AGREEMENT"), among the
Seller, Onyx Acceptance Corporation (the
"SERVICER") and ___________ (the "TRUSTEE").
SELLER..................... Onyx Acceptance Financial Corporation (the
"SELLER"), a wholly- owned, limited purpose
subsidiary of Onyx Acceptance Corporation
("ONYX").
SERVICER................... Onyx. See "The Servicer" in the Prospectus.
TRUSTEE.................... ____________________.
THE CERTIFICATES........... ____% Auto Loan Pass-Through Certificates, Series
199_-_ (the "CERTIFICATES") representing
fractional undivided interests in the Trust. The
Certificates will be offered for purchase in
denominations of $1,000 and integral multiples
thereof. See "The Certificates and the Agreement
- General" herein.
INITIAL CERTIFICATE
BALANCE.................... The initial principal balance of the Certificates
is approximately equal to $_________, the
aggregate principal balance of the Initial
Contracts as of the Cut-Off Date calculated in
accordance with the Rule of 78's or Simple
Interest Method, plus the Prefunded Amount. The
term "CUT-OFF DATE SCHEDULED BALANCE" means, with
respect to each Initial Contract, the principal
balance thereof as of the Cut- Off Date and, with
respect to each Subsequent Contract, means the
principal balance thereof as of the related
Subsequent Transfer Date, in each case calculated
in accordance with the Rule of 78's or Simple
Interest Method. See "The Contracts" herein and
in the Prospectus.
TRUST PROPERTY............. The Trust's assets (the "TRUST PROPERTY") will
include: (i) a pool of fixed rate motor vehicle
retail installment sales contracts (the "INITIAL
CONTRACTS") of which approximately ____% of the
Aggregate Scheduled Balance as of the Cut-Off
Date are Rule of 78's Contracts and approximately
____% of the Aggregate Scheduled Balance as of
the Cut-Off Date are Simple Interest Contracts,
and all of which were purchased from the Seller
and secured by new and used automobiles and
light-duty trucks (the "INITIAL FINANCED
VEHICLES"), (ii) certain documents relating to
the Initial Contracts, (iii) certain monies due
under such Initial Contracts on or after the
Cut-Off Date, (iv) security interests in the
Initial Financed Vehicles and the rights to
receive proceeds from claims on certain insurance
policies covering the Initial
S-1
<PAGE> 41
Financed Vehicles or the individual obligors
under each related Initial Contract, (v) all
amounts on deposit in the Collection Account,
including all Eligible Investments credited
thereto (but excluding any investment income from
Eligible Investments, which will be paid to the
Servicer), (vi) the benefits of a financial
guarantee insurance policy (the "FINANCIAL
GUARANTEE INSURANCE POLICY") issued by
______________ (the "INSURER"), (vii) the right
of the Seller to cause Onyx to repurchase certain
Contracts under certain circumstances, (viii) the
benefits under the Capitalized Interest
Agreement, dated as of ________, 199_, between
the Seller and the Trustee on behalf of the Trust
(the "CAPITALIZED INTEREST AGREEMENT"), (ix)
funds on deposit in a trust account established
for the benefit of the Certificateholders (the
"PREFUNDING ACCOUNT") and (x) all proceeds of the
foregoing. From time to time during the Funding
Period, and as frequently as each Business Day
(each such day a "SUBSEQUENT TRANSFER DATE"), the
Trust will purchase from the Seller with monies
on deposit in the Prefunding Account, additional
Rule of 78's and Simple Interest Method contracts
(the "SUBSEQUENT CONTRACTS" and, together with
the Initial Contracts, the "CONTRACTS") secured
by new and used automobile and light-duty trucks
(the "SUBSEQUENT FINANCED VEHICLES" and, together
with the Initial Financed Vehicles, the "FINANCED
VEHICLES"). As of each such Subsequent Transfer
Date, the Trust Property will include the
Subsequent Contracts delivered to the Trustee on
such Subsequent Transfer Date, certain documents
relating to the Subsequent Contracts, certain
monies due under the Subsequent Contracts after
the related Subsequent Transfer Dates, security
interests in the Subsequent Financed Vehicles,
the right to receive proceeds from claims under
certain insurance policies in respect of
individual Subsequent Financed Vehicles or the
related obligors and all proceeds of the
foregoing. See "The Trust" herein and "The
Trusts" in the Prospectus.
PASS-THROUGH RATE.......... ____% per annum, payable monthly at one-twelfth
the annual rate and calculated on the basis of a
360-day year of twelve 30-day months.
DISTRIBUTION DATE.......... The 15th day of each month (or, if such day is
not a Business Day, the next succeeding Business
Day) commencing ______ 15, 199_ (each a
"DISTRIBUTION DATE"). A "BUSINESS DAY" is a day
other than a Saturday, Sunday or other day on
which commercial banks located in California or
New York are authorized or obligated to be
closed.
FINAL DISTRIBUTION DATE.... ________, 200_.
INTEREST DISTRIBUTION...... On each Distribution Date, monthly interest (the
"INTEREST DISTRIBUTION") in an amount equal to
the product of one-twelfth of the Pass-Through
Rate and the Pool Balance as of the end of the
Collection Period preceding the related
Collection Period will be distributed on a pro
rata basis to the Certificateholders of record as
of the related Record Date; provided that the
Interest Distribution with respect to the first
Distribution Date will include an additional
$____ per $1,000 of initial principal balance of
the Certificates. The "POOL BALANCE" as of any
date is the Aggregate Scheduled Balance of the
Contracts as of such date, excluding those
Contracts which as of such
S-2
<PAGE> 42
date have become Liquidated Contracts or have
been repurchased by the Seller or purchased by
the Servicer, plus the amount, if any, remaining
on deposit in the Prefunding Account on such date
(excluding any investment earnings thereon).
Interest will be paid (i) to the extent of the
portion of the Pool Balance represented by
Contracts, from collections received on the
Contracts on deposit in the Collection Account or
previously collected and available for
distribution, and (ii) to the extent of the
portion of the Pool Balance represented by the
Prefunded Amount from investment earnings
thereon, and from payments under the Capitalized
Interest Agreement. A "COLLECTION PERIOD" with
respect to a Distribution Date will be the
calendar month preceding the month in which such
Distribution Date occurs; provided, that with
respect to Liquidated Contracts (as defined
below) the Collection Period will be the period
from but excluding the sixth Business Day
preceding the immediately preceding Distribution
Date to and including the sixth Business Day
preceding such Distribution Date. With respect to
the first Distribution Date the "COLLECTION
PERIOD" for Liquidated Contracts will be the
period from and including the Cut-Off Date to and
including the sixth Business Day preceding such
first Distribution Date. See "The Certificates
and the Agreement -- Distributions of Principal
and Interest" herein.
PRINCIPAL DISTRIBUTION..... On each Distribution Date, the Principal
Distribution for the related Collection Period
will be passed through to the Certificateholders.
The "PRINCIPAL DISTRIBUTION" on any Distribution
Date is the Aggregate Scheduled Balance Decline
(as defined below) for such Distribution Date
and, with respect to the Distribution Date
immediately following the end of the Funding
Period, any portion of the Prefunded Amount
remaining on deposit in the Prefunding Account.
The Principal Distribution on the Final
Distribution Date will include the Aggregate
Scheduled Balance of all Contracts that are
outstanding at the end of the Collection Period
immediately prior to the Final Distribution Date.
The "AGGREGATE SCHEDULED BALANCE DECLINE" for any
Distribution Date is the sum of (x) the amount by
which the Aggregate Scheduled Balance of the
Contracts as of the beginning of the related
Collection Period exceeds the Aggregate Scheduled
Balance of such Contracts as of the end of the
related Collection Period (excluding any
Subsequent Contracts added during the related
Collection Period) and (y) the amount by which
the Aggregate Scheduled Balance of the Subsequent
Contracts (determined as of each related
Subsequent Transfer Date) transferred to the
Trust during the related Collection Period
exceeds the Aggregate Scheduled Balance of such
Subsequent Contracts as of the end of the related
Collection Period. The "AGGREGATE SCHEDULED
BALANCE" of the Contracts is the sum of the
Scheduled Balance of each Contract. The
"SCHEDULED BALANCE" of a Rule of 78's Contract at
any date is equal to the Cut-Off Date Scheduled
Balance of such Contract reduced by the portion
of each scheduled payment of principal and
interest due on such Contract (the "MONTHLY P&I")
on or prior to the date of calculation that is
allocated to principal under the Recomputed
Actuarial Method. The Scheduled Balance of a
Simple Interest Contract at any date is equal to
the Cut-Off Date Scheduled Balance of such
Contract reduced by the portion of
S-3
<PAGE> 43
Monthly P&I paid on or prior to the date of
calculation that is allocated to principal under
the Simple Interest Method. The Scheduled Balance
of any Contract that is a Liquidated Contract or
that has been purchased by the Servicer or
repurchased by the Seller will equal zero. A
"LIQUIDATED CONTRACT" is a Contract that (a) is
the subject of a Full Prepayment, (b) is a
Defaulted Contract and with respect to which
Liquidation Proceeds constituting, in the
Servicer's reasonable judgment, the final amounts
recoverable have been received and deposited in
the Collection Account, (c) is paid in full on or
after its Maturity Date or (d) has been a
Defaulted Contract for four or more Collection
Periods and as to which Liquidation Proceeds have
not been deposited in the Collection Account;
provided, however, that in any event a Contract
that is delinquent in the amount of five monthly
installments of Monthly P&I at the end of a
Collection Period is a Liquidated Contract. A
"DEFAULTED CONTRACT" with respect to any
Collection Period is a Contract (a) which is, at
the end of such Collection Period, delinquent in
the amount of two monthly installments of Monthly
P&I or (b) with respect to which the related
Financed Vehicle has been repossessed or
repossession efforts with respect to the related
Financed Vehicle have been commenced. See "The
Contracts" herein and in the Prospectus and "The
Certificates and the Agreement -- Distributions
of Principal and Interest" herein.
THE PREFUNDING ACCOUNT..... The Prefunding Account will be maintained in the
name of the Trustee for the benefit of the
Certificateholders and is designed solely to hold
funds to be applied by the Trustee during the
Funding Period (as defined herein) to pay to the
Seller, on behalf of the Trust, the purchase
price for Subsequent Contracts. Monies on deposit
in the Prefunding Account will not be available
to cover losses on the Contracts, except as
described under "Mandatory Partial Prepayment"
below, to make distributions with respect to the
Certificates. Interest on the portion of the
Certificate Balance represented by the Prefunded
Amount will be payable from earnings received by
the Trustee during the related Collection Period
from investment of the Prefunded Amount on
deposit in the Prefunding Account and from
payments made under the Capitalized Interest
Agreement, and will not be payable from
collections on the Contracts.
The Prefunding Account will be created with an
initial deposit by the Seller of $__________ (the
"PREFUNDED AMOUNT"). The "FUNDING PERIOD" will be
the period from the date the Certificates are
issued (the "CLOSING DATE") until the earliest to
occur of (i) the date on which the remaining
Prefunded Amount is less than $______, (ii) the
date on which an Event of Default occurs or (iii)
the close of business on ________, 199_. During
the Funding Period, on one or more Subsequent
Transfer Dates (as defined herein), the Prefunded
Amount will be applied to purchase Subsequent
Contracts from the Seller. The Seller expects
that the Prefunded Amount will be reduced to less
than $_______ by the scheduled end of the Funding
Period, although no assurances can be given in
this regard. Any portion of the Prefunded Amount
remaining on deposit in the Prefunding Account at
the end of the Funding Period will be payable as
principal to Certificateholders on the
immediately following Distribution Date.
S-4
<PAGE> 44
See "The Certificates and the Agreement --
General" and "The Certificates and the Agreement
-- The Prefunding Account; Mandatory Partial
Prepayment of the Certificates" herein.
MANDATORY PARTIAL
PREPAYMENT................ The Certificates will be prepaid in part on the
Distribution Date immediately succeeding the date
on which the Funding Period ends in the event
that any portion of the Prefunded Amount remains
on deposit in the Prefunding Account after giving
effect to the sale to the Trust of all Subsequent
Contracts sold to the Trust during the Funding
Period, including any such acquisition and
conveyance on the date on which the Funding
Period ends (a "MANDATORY PARTIAL PREPAYMENT").
The amount to be distributed to
Certificateholders in connection with any
Mandatory Partial Prepayment will equal the
remaining Prefunded Amount. See "The Certificates
and the Agreement-- The Prefunding Account;
Mandatory Partial Prepayment of the Certificates"
herein.
CAPITALIZED INTEREST
AGREEMENT................ The Seller will enter into the Capitalized
Interest Agreement with the Trustee on behalf of
the Trust. The purpose of the Capitalized
Interest Agreement is to cover the shortfall
between interest distributable on the portion of
the Certificate Balance represented by the
Prefunded Amount and interest which will be
earned by the Trust on the Prefunded Amount prior
to the time it is used to purchase Subsequent
Contracts. The Capitalized Interest Agreement
will be in effect from the Closing Date until
_________, 199_. The Capitalized Interest
Agreement will provide for payment of the
Capitalized Interest Amount on or before five
business days prior to each Distribution Date,
ending with the Distribution Date on _________,
199_. The "CAPITALIZED INTEREST AMOUNT," with
respect to any Collection Period is an amount
equal to (a) one month's interest on the
Prefunded Amount on deposit in the Prefunding
Account as of the first day of such Collection
Period at the Pass-Through Rate plus (b)
one-twelfth of the premium for the Financial
Guarantee Insurance Policy on the Prefunded
Amount minus (c) the earnings received by the
Trustee during the related Collection Period from
investment of the Prefunded Amount on deposit in
the Prefunding Account.
The obligation of the Seller to pay the
Capitalized Interest Amount will be secured by
funds on deposit in a segregated trust account to
be maintained for the benefit of the
Certificateholders and the Insurer (the
"CAPITALIZED INTEREST ACCOUNT"). The amount
required to be deposited in the Capitalized
Interest Account will initially be equal to the
maximum Capitalized Interest Amount that may
become owing under the Capitalized Interest
Agreement assuming that with respect to the
Prefunded Amount during the Funding Period, a
certain rate of interest (set forth in the
Agreement) is earned and no Subsequent Contracts
are purchased. On each Subsequent Closing Date,
certain amounts shall be released to the Seller
from the Capitalized Interest Account with
respect to Subsequent Contracts acquired by the
Trust on each Subsequent Transfer Date since the
preceding Subsequent Closing Date, or the Closing
Date, as the case may be. See "The Certificates
and the Agreement -- Capitalized Interest
Agreement and Capitalized Interest Account"
herein.
S-5
<PAGE> 45
FINANCIAL GUARANTEE
INSURANCE POLICY........... On the Closing Date, the Insurer will issue the
Financial Guarantee Insurance Policy to the
Trustee pursuant to an Insurance and
Reimbursement Agreement (the "INSURANCE
AGREEMENT"), dated as of ________, 199_, by and
among the Insurer, Onyx, the Seller and the
Trustee. The Financial Guarantee Insurance Policy
is a "SECURITY INSURANCE POLICY" as defined in
the Prospectus. Pursuant to the Financial
Guarantee Insurance Policy, the Insurer will
unconditionally and irrevocably guarantee payment
of the Interest Distribution and Principal
Distribution on each Distribution Date to the
Trustee for the benefit of the
Certificateholders. If on the fifth Business Day
prior to any Distribution Date (the "SERVICER
REPORT DATE") the amount on deposit and available
in the Collection Account, after giving effect to
all amounts deposited or payable from the
Payahead Account with respect to such
Distribution Date, is less than the sum of the
Servicing Fee, the Principal Distribution and
Interest Distribution for such Distribution Date,
the Trustee, by delivering a notice in accordance
with the Financial Guarantee Insurance Policy,
shall demand payment under the Financial
Guarantee Insurance Policy in an amount equal to
such deficiency. The Insurer shall pay or cause
to be paid such amount to the Trustee for credit
to the Collection Account and the Trustee shall
withdraw from the Collection Account and shall
pay such amount to the Certificateholders on the
related Distribution Date. On the Final
Distribution Date, to the extent the amount on
deposit and available in the Collection Account
to make Interest Distributions and Principal
Distributions on such class of Certificates is
less than all remaining unpaid interest and
principal on the Certificates, the Insurer shall
pay or cause to be paid an amount equal to such
shortfall. See "The Certificates and the
Agreement - The Financial Guarantee Insurance
Policy" herein.
SERVICING FEE.............. The Servicer will be responsible for managing,
administering, servicing, and making collections
on the Contracts. Compensation to the Servicer
will consist of a monthly fee (the "SERVICING
FEE"), payable from the Trust to the Servicer on
each Distribution Date, in an amount equal to the
product of one-twelfth of ____% per annum (the
"SERVICING FEE RATE") multiplied by the Pool
Balance (excluding the Prefunded Amount) as of
the end of the Collection Period preceding the
related Collection Period. As additional
compensation, the Servicer will be entitled to
any late fees and other administrative fees and
expenses or similar charges collected with
respect to the Contracts. The Servicer or its
designee will also receive as servicing
compensation investment earnings on Eligible
Investments (other than earnings on amounts on
deposit in the Prefunding Account) and the
amount, if any, by which the outstanding
principal balance of a Rule of 78's Contract that
is subject to a Full Prepayment exceeds the
Scheduled Balance of such Contract. See "The
Certificates and the Agreement - Servicing Fee"
herein.
S-6
<PAGE> 46
CONTRACTS.................. The Aggregate Scheduled Balance of the Initial
Contracts as of the Cut-Off Date was $__________.
As of the Cut-Off Date the Initial Contracts had
a weighted average annual percentage rate of
____% and a weighted average remaining term of
____ months. Approximately _____% of the
Aggregate Scheduled Balance of the Initial
Contracts as of the Cut-Off Date allocate
interest and principal in accordance with the
Rule of 78's (the "RULE OF 78'S CONTRACTS"), and
approximately ____% in accordance with the Simple
Interest Method (the "SIMPLE INTEREST
CONTRACTS"). Approximately _____% of the
Aggregate Scheduled Balance of the Initial
Contracts as of the Cut-Off Date were originated
in California, ____% in Florida, ____% in
Washington, ____% in Arizona, ____% in Illinois,
and ____% in Nevada. No more than ___% of the
Initial Contracts were originated in any other
single state.
No later than the second Business Day following
the Business Day on which Onyx originates or
acquires a Motor Vehicle Contract during the
Funding Period, Onyx and/or a Selling Subsidiary
will sell, and the Seller will purchase, those
Motor Vehicle Contracts that meet the eligibility
requirements at a purchase price equal to the
aggregate principal amount thereof. Pursuant to
the Agreement and subject to the satisfaction of
certain conditions described herein, the Seller
will sell Subsequent Contracts to the Trust on
each Subsequent Transfer Date. Payment for each
such Subsequent Contract sold to the Trust shall
be made by release to the Seller from the
Prefunding Account of an amount equal to the
amount paid by the Seller to Onyx or such Selling
Subsidiary for such Subsequent Contract. The
aggregate principal balance of the Subsequent
Contracts to be conveyed to the Trust during the
Funding Period will not exceed $_________, which
is equal to the Prefunded Amount. On the Business
Day preceding the first Distribution Date and on
the Business Day preceding each Distribution Date
immediately following a Subsequent Transfer Date,
(each such date a "SUBSEQUENT CLOSING DATE") UCC
financing statements with respect to all
Subsequent Contracts sold to the Trust since the
preceding Subsequent Closing Date (or the Closing
Date, in the case of the first Subsequent Closing
Date) will be filed and all required legal
opinions, officers' certificates and other legal
documentation with respect to the sale of such
Subsequent Contracts to the Trust will be
executed and delivered.
All collections of Monthly P&I, all prepayments
on the Contracts collected by the Servicer and
all amounts paid under the Financial Guarantee
Insurance Policy will be deposited in or credited
to the Collection Account. Partial prepayments of
Monthly P&I ("PAYAHEADS") on Rule of 78's
Contracts will be transferred on the Servicer
Report Date to the Payahead Account, to be
applied against future scheduled payments of
Monthly P&I. Partial and full prepayments on
Simple Interest Contracts will be passed through
to Certificateholders on the Distribution Date
immediately following the Collection Period in
which such prepayments are received. All payments
to the Certificateholders will be made from the
Collection Account and certain funds remaining in
the Collection Account following distributions to
Certificateholders and others will be paid to the
Insurer to be promptly distributed in accordance
with the terms of the Insurance Agreement. See
"The Contracts" herein and in the Prospectus, and
"Description of the Transfer and Servicing
Agreements - Payahead Account" in the Prospectus.
S-7
<PAGE> 47
OPTIONAL TERMINATION....... The Servicer may purchase all of the Contracts on
any Distribution Date as of which the Pool
Balance (after giving effect to the Principal
Distribution otherwise to be made on such
Distribution Date) has declined to 10% or less of
the Cut-Off Date Scheduled Balance for all of the
Initial Contracts plus the Prefunded Amount (the
"ORIGINAL POOL BALANCE"), subject to certain
provisions in the Agreement. See "Description of
the Transfer and Servicing Agreements -
Repurchase of Contracts" in the Prospectus.
FEDERAL INCOME TAX
STATUS..................... In the opinion of Andrews & Kurth L.L.P. ("TAX
COUNSEL") the Trust will be treated as a grantor
trust for federal income tax purposes and will
not be subject to federal income tax. Certificate
Owners will report their pro rata share of all
income earned on the Contracts (other than
amounts, if any, treated as "stripped coupons")
and, subject to certain limitations in the case
of Certificate Owners who are individuals,
trusts, or estates, may deduct their pro rata
share of reasonable servicing and other fees. See
"Certain Federal Income Tax Consequences" in the
Prospectus for additional information concerning
the application of federal income tax laws to the
Trust and the Certificates.
ERISA CONSIDERATIONS....... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Certificates will be eligible for
purchase by employee benefit plans that are
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Upon
satisfaction of certain conditions described
herein and in the Prospectus. See "ERISA
Considerations" herein and in the Prospectus. Any
benefit plan fiduciary considering purchase of
the Certificates should, among other things,
consult with its counsel in determining whether
all required conditions have been satisfied.
RATING..................... It is a condition of issuance of the Certificates
that they be rated in the highest rating category
by two nationally recognized rating agencies.
Such ratings will be based primarily on the
issuance of the Financial Guarantee Insurance
Policy by the Insurer. See "Risk Factors --
Rating" herein.
REGISTRATION OF THE
CERTIFICATES............... The Certificates will initially be represented by
one or more certificates registered in the name
of Cede & Co. ("CEDE"), as the nominee of The
Depository Trust Company ("DTC"). No person
acquiring an interest in a Certificate through
the facilities of DTC (a "CERTIFICATE OWNER")
will be entitled to receive a Definitive
Certificate representing such person's interest
in the Trust, except in the event that Definitive
Certificates are issued in certain limited
circumstances. See "Description of the Securities
- Book-Entry Registration" and "- Definitive
Securities" in the Prospectus.
S-8
<PAGE> 48
RISK FACTORS
Prospective investors in the Certificates should consider the
following risk factors (as well as the factors set forth under "Risk Factors" in
the Prospectus) in connection with the purchase of Certificates. Any statistical
information presented below is based upon the characteristics of the Contracts
proposed to be included in the Trust as of the date of this Prospectus
Supplement. Such information may vary as a result of the possibility that
certain Contracts may be removed from the Trust prior to the date the
Certificates are issued (the "CLOSING DATE").
LIMITED OPERATING HISTORY OF ONYX
All of the Contracts with respect to a series of Securities have been
or will be originally purchased by Onyx from Dealers or originated by Onyx or a
subsidiary of Onyx itself in accordance with credit underwriting criteria
established by Onyx. In February 1994, Onyx commenced its operations as a
purchaser and servicer of motor vehicle retail installment sales contracts.
Thus, Onyx has historical performance data for only a relatively short period
with respect to the motor vehicle retail installment sales contracts it
purchases and originates. Delinquencies and loan losses may increase from
existing levels in the portfolio with the passage of time.
Onyx is still at an early stage of operations and is subject to all
of the risks inherent in the establishment of a new business enterprise and
must, among other things, continue to attract, retain and motivate qualified
personnel, support and grow its auto lending and contract servicing business,
maintain its existing relationships with automobile dealers and develop new
relationships with dealers in and beyond Onyx's present market region. Onyx
experienced operating losses from inception through December 31, 1995. Onyx's
operating losses for the years ended December 31, 1994 and December 31, 1995
were $3.5 million and $3.1 million, respectively. Onyx's net income for the
years ended December 31, 1996 and December 31, 1997, and for the quarter ended
March 31, 1998, were $7.7 million, $2.6 million and $827,771, respectively.
LIMITED LIQUIDITY
There is currently no secondary market for the Certificates, and
there will be no application to list the Certificates on an exchange. The
Underwriters currently intend, but are not obligated, to make a market in the
Certificates. However, there can be no assurance that the Underwriters will make
such a market, that a secondary market will develop or, if it does develop, that
it will provide Certificateholders with liquidity of investment or will continue
for the life of the Certificates.
MATURITY PREPAYMENT CONSIDERATIONS
The rate of distribution of principal on the Certificates will depend
on the rate of payment (including prepayments, liquidations and repurchases by
the Seller or purchases by Onyx under certain conditions) on the Contracts,
which is not possible to predict and, as discussed under "Mandatory Partial
Prepayment" immediately below, on whether sufficient additional Motor Vehicle
Contracts are generated for purchase with the Prefunded Amount before the end of
the Funding Period. Any full prepayments and repurchases of the Contracts can
reduce the average life of the Contracts and the aggregate interest received by
the Certificateholders over the life of the Certificates. Prepayments on Simple
Interest Contracts will shorten the average life of such Contracts and,
therefore, of the Certificates, because they will be passed through to
Certificateholders on the Distribution Date immediately following the Collection
Period in which such prepayments are received. Partial prepayments on Rule of
78's Contracts will be treated as Payaheads and accordingly will not affect the
average life of the Contracts because such payments will be held in the name of
the Trustee, acting on behalf of the Obligors and the Certificateholders, as
their interests may appear, until passed through in accordance with the original
schedule of payments for such Contracts. See "Description of the Transfer and
Servicing Agreements -- Payahead Account" in the Prospectus.
Onyx has limited historical experience with respect to prepayments,
has not as of the date hereof prepared data or prepayment rates, and is not
aware of publicly available industry statistics that set forth principal
prepayment experience for retail installment sales contracts similar to the
Contracts. Onyx can make no prediction as to the actual prepayment rates that
will be experienced on the Contracts in either stable or changing interest rate
environments. See "--Limited Operating History of Onyx" and "Maturity and
Prepayment Considerations" herein. Certificateholders will bear all reinvestment
risk resulting from the rate of prepayment of the Contracts.
S-9
<PAGE> 49
MANDATORY PARTIAL PREPAYMENT
The rate of distribution of principal on the Certificates will in
part depend on whether sufficient additional Motor Vehicle Contracts are
generated for purchase with the Prefunded Amount before the end of the Funding
Period. No assurances can be given that sufficient Subsequent Contracts will be
generated to avoid Mandatory Partial Prepayment of the Certificates. In the
event Onyx does not generate, for purchase by the Trust, sufficient Subsequent
Contracts to avoid Mandatory Partial Prepayment of the Certificates, the
weighted average life of the Certificates will be shortened by any such
Mandatory Partial Prepayment under the circumstances described under "The
Certificates and the Agreement -- The Prefunding Account; Mandatory Partial
Prepayment of the Certificates" herein. Certificateholders will bear all
reinvestment risk resulting from the payment of the Prefunded Amount due to
Onyx's inability to generate sufficient additional Motor Vehicle Contracts
during the Funding Period.
Upon the occurrence of a Mandatory Partial Prepayment, the holders of
Certificates will receive an amount equal to the portion of the Prefunded Amount
remaining in the Prefunding Account. It is anticipated that the aggregate
principal amount of Subsequent Contracts sold to the Trust during the Funding
Period will not be exactly equal to the Prefunded Amount and that therefore
there will be at least a nominal amount of principal prepaid to
Certificateholders.
GEOGRAPHIC CONCENTRATION
Economic conditions in the states where the obligors under the
Contracts (each, an "OBLIGOR") reside may affect the delinquency, loan loss and
repossession experience of the Trust with respect to the Initial Contracts.
Approximately ____% of the Aggregate Scheduled Balance of the Initial Contracts
as of the Cut-Off Date will have been originated in California, ____% in
Florida, ____% in Washington, ____% in Arizona, ____% in Illinois and _____% in
Nevada. No more than ____% of the Initial Contracts were originated in any other
single state. Subsequent Contracts may also be geographically concentrated in
one or more states. Adverse economic conditions or other factors particularly
affecting California, Arizona, Washington, Illinois, Florida, Nevada or any
other state in which the Contracts are geographically concentrated could
adversely affect the delinquency, loan loss or repossession experience of the
Trust.
LIMITED ASSETS
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Contracts, amounts on
deposit in the Prefunding Account, the right to receive payments under the
Capitalized Interest Agreement (including from amounts on deposit in the
Capitalized Interest Account) and the right to receive payments under the
Financial Guarantee Insurance Policy. Holders of the Certificates must rely for
repayment upon payments on the Contracts and, if and to the extent available,
amounts on deposit in the Prefunding Account, the Capitalized Interest Account
and payments of claims made under the Financial Guarantee Insurance Policy. The
Prefunded Amount on deposit in the Prefunding Account will be used solely to
purchase Subsequent Contracts and is not available to cover losses on the
Contracts. The Capitalized Interest Account is designed to cover obligations of
the Trust relating to that portion of its assets not invested in contracts and
is not designed to provide protection against losses on the Contracts.
Similarly, although the Financial Guarantee Insurance Policy will be available
to cover shortfalls in payments of the Principal Distribution and Interest
Distribution to Certificateholders on the related Distribution Date, if the
Insurer defaults in its obligations under the Financial Guarantee Insurance
Policy, the Trust will depend on current distributions on the Contracts and,
amounts, if any, available therefor in certain collateral accounts maintained
for the benefit of the Insurer to make distributions on the Certificates. See
"Description of the Insurer" and "The Certificates and the Agreement - The
Financial Guarantee Insurance Policy" herein. Consequently, holders of the
Certificates will only be able to look to payments on the Contracts and the
Financial Guarantee Insurance Policy for payment.
RATING
It is a condition of issuance of the Certificates that they be rated
in the highest rating category by two nationally recognized rating agencies. A
security rating is not a recommendation to buy, sell or hold securities and may
be revised
S-10
<PAGE> 50
or withdrawn at any time by the assigning rating agency. There can be no
assurance that the ratings of the Certificates will not be lowered or withdrawn
if, in the sole judgment of a rating agency, circumstances in the future so
warrant, including a downgrading of the Insurer. The Seller cannot predict with
certainty what effect any revision or withdrawal of a rating of the Certificates
may have on the liquidity or market value of the Certificates. Such ratings of
the Certificates address the likelihood of the timely payment of each scheduled
Interest Distribution and Principal Distribution, which are guaranteed by the
Insurer pursuant to the Financial Guarantee Insurance Policy. Therefore, the
ratings are primarily dependent on the rating of the Insurer, and a change in
the Insurer's rating may affect the ratings of the Certificates. See
"Description of the Insurer" herein for a description of the Insurer's rating.
THE TRUST
Pursuant to the Agreement, the Seller will establish the Onyx
Acceptance Grantor Trust 199_-_ (the "TRUST") by selling and assigning the
following property to _____________ in its capacity as trustee of the Trust (the
"TRUSTEE") in exchange for the Certificates executed and authenticated by the
Trustee: (i) the Initial Contracts, of which approximately ___% of the Aggregate
Scheduled Balance as of the Cut-Off Date are Rule of 78's Contracts and
approximately ___% of the Aggregate Scheduled Balance as of the Cut-Off Date are
Simple Interest Contracts, and all of which were purchased from the Seller and
secured by the Initial Financed Vehicles, (ii) certain documents relating to the
Initial Contracts, (iii) certain monies due under such Initial Contracts on or
after the Cut-Off Date, (iv) security interests in the Initial Financed Vehicles
and the rights to receive proceeds from claims on certain insurance policies
covering the Initial Financed Vehicles or the Obligors, (v) all amounts on
deposit in the Collection Account, including all Eligible Investments credited
thereto (but excluding any investment income from Eligible Investments, which
will be paid to the Servicer), (vi) the benefits of the Financial Guarantee
Insurance Policy issued by the Insurer, (vii) the right of the Seller to cause
Onyx to repurchase certain Contracts under certain circumstances, (viii) the
benefits of the Capitalized Interest Account under the Capitalized Interest
Agreement, (ix) funds on deposit in the Prefunding Account, and (x) all proceeds
of the foregoing. From time to time during the Funding Period, and as frequently
as each Business Day (each such day a "SUBSEQUENT TRANSFER DATE"), the Trust
will purchase from the Seller with monies on deposit in the Prefunding Account,
additional Rule of 78's and Simple Interest Method contracts (the "SUBSEQUENT
CONTRACTS" and, together with the Initial Contracts, the "CONTRACTS") secured by
new and used automobile and light-duty trucks (the "SUBSEQUENT FINANCED
VEHICLES" and, together with the Initial Financed Vehicles, the "FINANCED
VEHICLES"). As of each such Subsequent Transfer Date, the Trust Property will
include the Subsequent Contracts delivered to the Trustee on such Subsequent
Transfer Date, certain documents relating to the Subsequent Contracts, certain
monies due under the Subsequent Contracts after the related Subsequent Transfer
Dates, security interests in the Subsequent Financed Vehicles, the right to
receive proceeds from claims under certain insurance policies in respect of
individual Subsequent Financed Vehicles or the related obligors and all proceeds
of the foregoing. Each Certificate will represent a fractional undivided
interest in the Trust.
The Trust will be formed for this transaction pursuant to the
Agreement and, prior to formation, will have had no assets or obligations. After
formation, the Trust will not engage in any activity other than acquiring and
holding the Contracts, issuing the Certificates, distributing payments thereon
and as otherwise described herein and as provided in the Agreement. The Trust
will not acquire any Motor Vehicle Contracts or assets other than the Trust
Property and Subsequent Contracts and Subsequent Financed Vehicles described
herein and will not have any need for additional capital resources.
THE ONYX PORTFOLIO OF MOTOR VEHICLE CONTRACTS
PURCHASE AND ORIGINATION OF MOTOR VEHICLE CONTRACTS
Onyx's portfolio of retail installment sales contracts and
installment loan agreements are secured by new and used automobiles and
light-duty trucks ("MOTOR VEHICLE CONTRACTS"). Motor Vehicle Contracts in Onyx's
portfolio are purchased by Onyx from Dealers that originate such contracts,
purchased by a subsidiary of Onyx from credit unions that originate such
contracts, or originated by Onyx or a subsidiary of Onyx. Substantially all of
the Initial Contracts have been, and the Subsequent Contracts will be, purchased
by Onyx from new and used car Dealers unaffiliated with Onyx and the Seller, and
a limited number of the Initial and Subsequent Contracts have been or will be
purchased or
S-11
<PAGE> 51
originated by subsidiaries of Onyx. All of the Initial Contracts
will have been, and all of the Subsequent Contracts will be, sold to the Seller
and then to the Trust. See "The Onyx Portfolio of Motor Vehicle Contracts -
Purchase and Origination of Motor Vehicle Contracts" in the Prospectus.
Approximately ____% of the Aggregate Scheduled Balance of the Initial
Contracts as of the Cut-Off Date will have been originated in California, ____%
in Florida, ____% in Washington, ____% in Arizona, ____% in Illinois and
____% in Nevada. No more than ____% of the Initial Contracts were originated in
any other single state. See "Risk Factors -- Geographic Concentration" herein.
The payment obligations of the Obligor under each Motor Vehicle Contract are
secured by the vehicle purchased with the loan proceeds provided under that
Motor Vehicle Contract.
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables set forth information with respect to the
experience of Onyx relating to delinquencies, loan losses and recoveries for the
portfolio of Motor Vehicle Contracts owned and serviced by Onyx on an annual
basis commencing December 31, 1994. The tables include delinquency information
relating to those Motor Vehicle Contracts that were purchased, originated, sold
and serviced by Onyx. All of the Motor Vehicle Contracts were originally
purchased by Onyx from Dealers, or originated by Onyx or a subsidiary of Onyx,
in accordance with credit underwriting criteria established by Onyx. In February
1994, Onyx commenced its operations as a purchaser and servicer of motor vehicle
retail installment sales contracts. Thus, Onyx has historical performance for
only a limited time period with respect to the Motor Vehicle Contracts it
purchases and originates and thus delinquencies and loan losses may increase
from existing levels in the portfolio with the passage of time. Delinquency and
loan loss experience may be influenced by a variety of economic, social and
other factors. See "Risk Factors" herein and in the Prospectus.
The delinquency and loss tables set forth below show increases in the
delinquency and loss rates experienced by Onyx over the period shown. Management
of Onyx believes that this is attributable, in part, to an increase on a
national basis in the level of bankruptcies and consumer defaults generally and
the tendency of delinquencies and losses, with respect to a pool of automobile
loans, to increase after a period of seasoning. Management believes that as the
average age of the Motor Vehicle Contracts included in Onyx's portfolio
increases, delinquencies and losses may continue to rise somewhat.
During the fourth quarter of 1996 and first quarter of 1997
management of Onyx enhanced the collections process by completing the
centralization of collections at Onyx's Irvine headquarters and hiring a manager
with over 25 years of collections experience to head the department. Collections
were previously handled at each of Onyx's Auto Finance Centers, each of which
was responsible for collections in certain geographic areas. Centralizing
collections is intended to reduce cost and enhance effectiveness by enabling
personnel to specialize in specific stages of the collections process, rather
than focusing on specific geographic areas. For example, a collections officer
previously working at a regional Auto Finance Center might have focused on a
particular geographic region and covered all stages of collections (e.g., from
delinquencies through bankruptcies). In the centralized collections operation,
this officer might cover all geographic areas, but focus on a particular stage
of collections (e.g., 60-day delinquencies).
S-12
<PAGE> 52
DELINQUENCY EXPERIENCE OF ONYX MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31, AT MARCH 31,
1994 1995 1996 1997 1998
------------------- ------------------- ------------------- ------------------- ----------------
AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio ...... $ 74,581 6,893 $218,207 20,156 $400,665 38,275 $757,277 73,502 $884,692 86,327
Delinquencies
30-59 days(1)(2) ....... $ 15 2 $ 1,608 153 $ 5,022 478 $ 11,902 1,211 $ 9,194 937
60-89 days(1)(2) ....... 27 4 470 35 1,816 162 3,370 346 2,863 277
90+ days(1)(2) ......... 12 1 547 42 1,279 111 3,742 316 3,573 320
Total delinquencies as
a percent of servicing
portfolio .07% .10% 1.20% 1.14% 2.03% 1.96% 2.51% 2.55% 1.77% 1.78%
</TABLE>
- ----------
(1) Delinquencies include principal amounts only, net of repossessed
inventory. Repossessed inventory as a percent of the servicing
portfolio was .00%, .24%, .56%, 1.05% and ___% at December 31, 1994,
1995, 1996 and 1997 and March 31, 1998 respectively.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
LOAN LOSS EXPERIENCE OF ONYX MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
--------------------------------------------------------- -------------
DEC.31, DEC. 31, DEC. 31, DEC. 31, MAR. 31
1994 1995 1996 1997 1998
-------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Number of Motor Vehicle Contracts outstanding 6,893 20,156 38,275 73,502 86,327
Period end outstanding ...................... $ 74,581 $ 218,207 $ 400,665 $ 757,277 $884,692
Average outstanding ......................... $ 29,301 $ 141,029 $ 311,340 $ 563,343 $815,922
Number of gross charge-offs ................. 0 197 987 2,161 818
Gross charge-offs ........................... $ 0 $ 548.2 $ 5,789.2 $ 13,076.1 $4,457.6
Net charge-offs(1) .......................... $ 0 $ 528.7 $ 5,066.1 $ 11,433.9 $3,761.8
Net charge-offs as a percent of period end
outstanding ............................... 0.0% .24% 1.26% 1.51% 1.70%
Net charge-offs as a percent of average
outstanding ............................... 0.0% .37% 1.63% 2.03% 1.84%
</TABLE>
- ----------
(1) Net charge-offs are gross charge-offs minus recoveries of Motor
Vehicle Contracts previously charged off.
THE CONTRACTS
All of the Contracts will have been purchased by the Seller from Onyx
or a subsidiary of Onyx (each such subsidiary, a "SELLING SUBSIDIARY").
Substantially all of the Contracts have been purchased by Onyx from new and used
car Dealers unaffiliated with Onyx or the Seller, and a limited number of
Contracts have been purchased or originated by subsidiaries of Onyx. See "The
Onyx Portfolio of Motor Vehicle Contracts" herein and in the Prospectus. Each of
the Contracts in the Trust (including each Subsequent Contract) will be a fixed
rate contract where the allocation of each payment between interest and
principal is calculated using the Rule of 78's or the Simple Interest Method.
Approximately ____% of the Aggregate Scheduled Balance of the Initial Contracts
as of the Cut-Off Date allocate interest and principal in accordance with the
Rule of 78's (the "RULE OF 78'S CONTRACTS"), and approximately _____% in
accordance with the Simple Interest Method (the "SIMPLE INTEREST CONTRACTS").
See "The Contracts" in the Prospectus.
S-13
<PAGE> 53
The Initial Contracts were, and the Subsequent Contracts will be,
selected from the Motor Vehicle Contracts in the portfolio of Onyx using the
following criteria (the "ELIGIBILITY REQUIREMENTS"). No selection procedures
were used with respect to the Initial Contracts and none will be used with
respect to the Subsequent Contracts that are believed by Onyx or the Seller to
be adverse to the Certificateholders or the Insurer. Approximately ____% of the
Aggregate Scheduled Balance of the Initial Contracts are secured by new Financed
Vehicles and approximately ____% of the Aggregate Scheduled Balance of the
Initial Contracts are secured by used Financed Vehicles. The Seller may not
substitute other Motor Vehicle Contracts for the Contracts at any time during
the term of the Agreement.
The Seller will represent that all of the Contracts included in the
Trust satisfy the following Eligibility Requirements:
(a) Such Contracts are or will be secured by a new or used automobile
or light-duty truck;
(b) Such Contracts have remaining maturities as of the Cut-Off Date
or related Subsequent Transfer Dates, as applicable, of not more than ___
months;
(c) Such Contracts have or will have original maturities of not more
than ___ months;
(d) Such Contracts (i) are or will be fully-amortizing fixed rate
contracts which provide for level scheduled monthly payments determined on the
basis of the Rule of 78's or the Simple Interest Method (except for the last
payment, which may be minimally different from the level payments) and (ii) have
or will have yields (using the Recomputed Yield for the Rule of 78's Contracts)
that equal or exceed ____%;
(e) Such Contracts are or will be secured by Financed Vehicles that,
as of the Cut-Off Date or related Subsequent Transfer Dates, as applicable, have
not been repossessed without reinstatement;
(f) Such Contracts have or will have no payment more than ___ days
past due as of the Cut-Off Date or related Subsequent Transfer Dates, as
applicable;
(g) Such Contracts or will have remaining principal balances as of
the Cut-Off Date or related Subsequent Transfer Dates, as applicable, of at
least $____;
(h) Such Contracts were or will be made to Obligors located in the
States of [Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois,
Indiana, Missouri, Montana, New Jersey, New York, Nevada, Oregon, Texas, Utah,
Virginia and Washington]; and
(i) As of the Cut-Off Date or related Subsequent Transfer Dates, as
applicable, the Seller has not received notice that any related Obligor has
filed for bankruptcy.
Set forth below is data concerning the Initial Contracts which, as of
the Cut-Off Date, had an Aggregate Scheduled Balance of $_________.
COMPOSITION OF THE INITIAL CONTRACTS
<TABLE>
<S> <C>
Aggregate principal balance...................................... $______
Number of Initial Contracts...................................... _______
Average principal balance outstanding............................ $______
Average original amount financed................................. $______
Original amount financed (range)................................. $______ to ________
Weighted average APR............................................. _____%
APR (range)...................................................... ____% to ____%
Weighted average original term................................... ____ months
Original term (range)............................................ ___ to __ months
Weighted average remaining term.................................. _____ months
Remaining term (range)........................................... __ to __ months
</TABLE>
S-14
<PAGE> 54
DISTRIBUTION BY APRS OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF AGGREGATE
INITIAL INITIAL PRINCIPAL SCHEDULED
APR RANGE(1) CONTRACTS CONTRACTS BALANCE BALANCE
------------ --------- --------- ------- -------
<S> <C> <C> <C> <C>
7.001% to 8.000%.................
8.001% to 9.000%.................
9.001% to 10.000%................
10.001% to 11.000%...............
11.001% to 12.000%...............
12.001% to 13.000%...............
13.001% to 14.000%...............
14.001% to 15.000%...............
15.001% to 16.000%...............
16.001% to 17.000%...............
17.001% to 18.000%...............
18.001% to 19.000%...............
19.001% to 20.000%...............
20.001% to 21.000%...............
21.001% and over.................
Totals.................
</TABLE>
- ----------
(1) Because the principal balance of each Contract sold to the Trust is
the Cut-Off Date Scheduled Balance, which in the case of Rule of 78's
Contracts is higher than what the principal balance of the Rule of
78's Contracts would have been had principal and interest been
allocated from the date of origination in accordance with the
actuarial method, the Recomputed Yield for each rule of 78's Contract
is less than the APR of such Initial Contract specified herein. On a
weighted average basis, the yield for all the Initial Contracts,
using the Recomputed Yield for the Rule of 78's Contracts, in the
aggregate, is ____%. See "The Contracts" herein and in the
Prospectus.
GEOGRAPHIC CONCENTRATION OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF AGGREGATE
INITIAL INITIAL PRINCIPAL SCHEDULED
CONTRACTS CONTRACTS BALANCE BALANCE
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Arizona.....................
California..................
Colorado....................
Florida.....................
Georgia.....................
Idaho.......................
Illinois....................
Indiana.....................
Missouri....................
Montana.....................
New Jersey..................
Nevada......................
New York....................
Oregon......................
Texas.......................
Utah........................
Virginia....................
Washington..................
Total.............
</TABLE>
S-15
<PAGE> 55
MATURITY AND PREPAYMENT CONSIDERATIONS
The Contracts are prepayable in full by the Obligors at any time
without penalty. See "Maturity and Prepayment Considerations" in the Prospectus
regarding the effects of prepayments on the weighted average life of the
Contracts. In addition to the effects described in the Prospectus, the weighted
average maturity of the Certificates will be reduced to the extent that
sufficient additional Motor Vehicle Contracts are not generated for purchase by
the Trust with the Prefunded Amount before the end of the Funding Period,
because any remaining Prefunded Amount will be included in the Principal
Distribution made to Certificateholders on the Distribution Date at or
immediately following the end of the Funding Period, but in no event later than
the _______, 199__ Distribution Date. Although Onyx believes that sufficient
additional Motor Vehicle Contracts will be originated for purchase with the
Prefunded Amount by the end of the Funding Period, no assurances can be given in
that regard. Certificateholders will bear all reinvestment risk resulting from
prepayment of the Contracts. See "Risk Factors -- Prepayment Considerations"
herein.
Onyx has limited historical experience with respect to prepayments,
has not as of the date hereof prepared data on prepayment rates, and is not
aware of publicly available industry statistics that set forth principal
prepayment experience for retail installment sales contracts similar to the
Contracts. Onyx can make no prediction as to the actual prepayment rates that
will be experienced on the Contracts in either stable or changing interest rate
environments. Certificate Owners will bear all reinvestment risk resulting from
the rate of prepayment of the Contracts.
YIELD CONSIDERATIONS
Interest due will be passed through on each Distribution Date in an
amount equal to the product of one-twelfth of the Pass-Through Rate and the Pool
Balance as of the end of the Collection Period preceding the related Collection
Period (or the Original Pool Balance, in the case of the first Distribution
Date). In the event of a principal prepayment on a Contract during a Collection
Period, Certificateholders will receive interest for the full month on the
related Distribution Date. See "The Certificates and the Agreement --
Distributions of Principal and Interest" herein.
Although the Contracts have different APRs, the yield on each
individual Contract, using the Recomputed Yield for Rule of 78's Contracts, will
equal or exceed ____%. Therefore, disproportionate rates of prepayments between
Contracts with higher and lower APRs will not affect the yield to
Certificateholders.
USE OF PROCEEDS
The net proceeds of the initial sale of Certificates will be used by
the Trust to purchase the Initial Contracts from the Seller pursuant to the
Pooling and Servicing Agreement and to fund the deposits in the Prefunding
Account, and certain collateral accounts maintained for the benefit of the
Insurer. The net proceeds to be received by the Seller from the sale of the
Contracts to the Trust will be used by the Seller to repay certain indebtedness
incurred in connection with its acquisition of the Contracts and to pay certain
other expenses in connection with the pooling of the Contracts and the issuance
of the Certificates.
THE CERTIFICATES AND THE AGREEMENT
The Certificates will be issued pursuant to the Agreement, a form of
which will be filed with the Commission following the issuance of the
Certificates. The following summaries of certain provisions of the Agreement do
not purport to be complete and are subject to, and qualified in their entirety
by reference to, the provisions of the Agreement. Where particular provisions of
or terms used in the Agreement are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summaries.
S-16
<PAGE> 56
GENERAL
The Certificates of each class will be offered for purchase in
minimum denominations of $1,000 and integral multiples thereof, except that one
Certificate may be issued in a denomination that includes any residual portion
of the Original Pool Balance. Each Certificate will rank pari passu with each
other Certificate. The Certificates will initially be represented by one or more
Certificates registered in the name of Cede, as nominee of DTC, except as set
forth below. The interests of holders of beneficial interests in the
Certificates (each a "CERTIFICATE OWNER") will be available for purchase in
denominations of $1,000 and integral multiples thereof in book-entry form only.
The Seller has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the holder of record of the Certificates.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, no Certificate Owner will be entitled to receive
a certificate representing such person's interest in the Certificates. All
references herein to actions by Certificateholders shall refer to actions taken
by DTC upon instructions from its participating organizations (the
"PARTICIPANTS") and all references herein to distributions, notices, reports and
statements to Certificateholders shall refer to distributions, notices, reports
and statements to DTC or Cede, as the registered holder of the Certificates, as
the case may be, for distribution to Certificate Owners in accordance with DTC
procedures. See "Description of the Securities - Book-Entry Registration" and
"-Definitive Securities" in the Prospectus.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
On each Distribution Date, monthly interest (the "INTEREST
DISTRIBUTION") in an amount equal to the product of one-twelfth of the
Pass-Through Rate and the Pool Balance as of the end of the Collection Period
preceding the related Collection Period will be distributed on a pro rata basis
to the Certificateholders of record as of the related Record Date; provided that
the Interest Distribution with respect to the first Distribution Date will
include an additional $____ per $1,000 of initial principal balance of the
Certificates. The "POOL BALANCE" as of any date is the Aggregate Scheduled
Balance of the Contracts as of such date, excluding those Contracts which as of
such date have become Liquidated Contracts or have been repurchased by the
Seller or purchased by the Servicer, plus the amount, if any, remaining on
deposit in the Prefunding Account on such date (excluding investment earnings
thereon). Interest will be paid (i) to the extent of the portion of the Pool
Balance represented by Contracts, from collections received on the Contracts on
deposit in the Collection Account or previously collected and available for
distribution, and (ii) to the extent of the portion of the Pool Balance
represented by the Prefunded Amount from investment earnings thereon, and from
payments under the Capitalized Interest Agreement. A "COLLECTION PERIOD" with
respect to a Distribution Date will be the calendar month preceding the month in
which such Distribution Date occurs; provided, that with respect to Liquidated
Contracts the Collection Period will be the period from but excluding the sixth
Business Day preceding the immediately preceding Distribution Date to and
including the sixth Business Day preceding such Distribution Date. With respect
to the first Distribution Date the "COLLECTION PERIOD" for Liquidated Contracts
will be the period from and including the Cut-Off Date to and including the
sixth Business Day preceding such first Distribution Date. Each Interest
Distribution will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Unless and until Definitive Certificates have been issued,
distributions on each Distribution Date will be made through the facilities of
DTC and the related "RECORD DATE" will be the Business Day prior to such
Distribution Date. If Definitive Certificates are issued, the related "RECORD
DATE" will be the last day of the calendar month preceding such Distribution
Date. The final distribution of principal of and interest on each Certificate
will be made only upon presentation and surrender of such Certificate on or
after the Final Distribution Date (or such earlier termination date as is
provided by the Agreement) at the office or agency of the Trustee maintained for
that purpose.
On each Distribution Date, the Principal Distribution for the related
Collection Period will be passed through to the Certificateholders. The
"PRINCIPAL DISTRIBUTION" on any Distribution Date is the Aggregate Scheduled
Balance Decline during the related Collection Period and, with respect to the
Distribution Date immediately on or following the last day of the Funding
Period, any portion of the Prefunded Amount remaining on deposit in the
Prefunding Account. The Principal Distribution on the Final Distribution Date
will include the Aggregate Scheduled Balance of all Contracts that are
outstanding at the end of the Collection Period immediately prior to the Final
Distribution Date. The "AGGREGATE SCHEDULED BALANCE DECLINE" for any
Distribution Date will be the sum of (x) the amount by which the Aggregate
Scheduled Balance of the Contracts as of the beginning of the related Collection
Period exceeds the Aggregate Scheduled Balance of such Contracts as of the end
of the related Collection Period (excluding any Contracts added as Subsequent
Contracts during the related Collection Period) and (y) the amount by which the
Aggregate Scheduled Balance of the Subsequent Contracts (determined as of each
related Subsequent Transfer Date) transferred
S-17
<PAGE> 57
to the Trust during the related Collection Period exceeds the Aggregate
Scheduled Balance of such Contracts as of the end of the related Collection
Period. The "AGGREGATE SCHEDULED BALANCE" of the Contracts is the sum of the
Scheduled Balances of each Contract. The "SCHEDULED BALANCE" of a Rule of 78's
Contract at any date is equal to the Cut-Off Date Scheduled Balance of such
Contract reduced by the portion of each scheduled payment of principal and
interest due on such Contract (the "MONTHLY P&I") on or prior to the date of
calculation that is allocable to principal under the Recomputed Actuarial
Method. The Scheduled Balance of a Simple Interest Contract at any date is equal
to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of
Monthly P&I paid on or prior to the date of calculation that is allocated to
principal under the Simple Interest Method. The Scheduled Balance of any
Contract that is a Liquidated Contract or that has been purchased by the
Servicer or repurchased by the Seller will equal zero. A "LIQUIDATED CONTRACT"
is a Contract that (a) is the subject of a Full Prepayment, (b) is a Defaulted
Contract with respect to which Liquidation Proceeds constituting, in the
Servicer's reasonable judgment, the final amounts recoverable have been received
and deposited in the Collection Account, (c) is paid in full on or after its
Maturity Date or (d) has been a Defaulted Contract for four or more Collection
Periods and as to which Liquidation Proceeds have not been deposited in the
Collection Account; provided, however, that in any event a Contract that is
delinquent in the amount of five monthly installments of Monthly P&I at the end
of a Collection Period is a Liquidated Contract. A "DEFAULTED CONTRACT" with
respect to any Collection Period is a Contract (a) which is, at the end of such
Collection Period, delinquent in the amount of two monthly installments of
Monthly P&I or (b) with respect to which the related Financed Vehicle has been
repossessed or repossession efforts with respect to the related Financed Vehicle
have been commenced.
The Monthly P&I for a Contract due on each Due Date is substantially
equal for the term of the Contract. The Scheduled Balance of each Contract as of
the Cut-Off Date, which will be treated as being equal to the Cut-Off Date
Scheduled Balance, will be set forth in a schedule to the Agreement. The yield
of each Contract (using the Recomputed Yield for Rule of 78's Contracts) will at
least equal ____%.
At the issuance of the Certificates, the initial aggregate principal
amount of the Certificates will be approximately equal to the sum of the
Aggregate Scheduled Balance of all the Initial Contracts as of the Cut-Off Date
plus the Prefunded Amount.
THE PREFUNDING ACCOUNT; MANDATORY PARTIAL PREPAYMENT OF THE CERTIFICATES
The Prefunding Account. The Servicer will establish an account in the
name of the Trustee for the benefit of the Certificateholders into which the
Prefunded Amount (which equals $__________, or approximately __% of the Original
Pool Balance) will be deposited on the Closing Date from the net proceeds
received from the sale of the Certificates and from which monies will be
released during the Funding Period to purchase Subsequent Contracts from the
Seller (the "PREFUNDING ACCOUNT"). The Funding Period will be the period from
the Closing Date until the earliest to occur of (i) the date on which the
Prefunded Amount is less than $_____, (ii) the date on which an Event of Default
occurs, or (iii) the close of business on ________, 199__.
The Prefunding Account will be an Eligible Account. An "ELIGIBLE
ACCOUNT" is (i) a trust account that is either (a) maintained by the Trustee,
(b) maintained with a depository institution or trust company the commercial
paper or other short-term debt obligations of which have credit ratings from
Standard & Poor's at least equal to "A-1" and from Moody's equal to "P-1," which
account is fully insured up to applicable limits by the Federal Deposit
Insurance Corporation or (c) maintained with a depository institution acceptable
to the Insurer or (ii) a general ledger account or deposit account at a
depository institution acceptable to the Insurer. The Prefunding Account will be
part of the Trust but monies on deposit therein will not be available to cover
losses on or in respect of the Contracts. Any portion of the Prefunded Amount
remaining on deposit in the Prefunding Account as of the end of the Funding
Period will be payable as described below as prepayment of principal to the
Certificateholders. Monies on deposit in the Prefunding Account may be invested
in Eligible Investments in the manner described in the Agreement. Earnings on
investment of funds in the Prefunding Account will be used, together with the
Capitalized Interest Amount paid under the Capitalized Interest Agreement, to
pay the Pass-Through Rate on the portion of the Pool Balance relating to the
Prefunding Account. The Trust will not be required to register under the
Investment Company Act of 1940.
Upon each conveyance of Subsequent Contracts on each Subsequent
Transfer Date to the Trust, an amount equal to the purchase price paid by the
Seller to Onyx and any Selling Subsidiary for such Subsequent Contracts on the
related Subsequent Transfer Date will be released from the Prefunding Account
and paid to the Seller.
S-18
<PAGE> 58
Mandatory Partial Prepayment of the Certificates. The Certificates
will be subject to partial Mandatory Partial Prepayment on the Distribution Date
immediately at or succeeding the date on which the Funding Period ends, to the
extent that any portion of the Prefunded Amount, exclusive of any investment
earnings thereon, remains on deposit in the Prefunding Account after giving
effect to the purchase by the Seller and conveyance to the Trust of any
Subsequent Contracts on the related Subsequent Transfer Dates, including any
such purchase and conveyance on the date on which the Funding Period ends.
Upon the occurrence of a Mandatory Partial Prepayment, the holders of
Certificates will receive an amount equal to the portion of the Prefunded Amount
remaining in the Prefunding Account. It is anticipated that the aggregate
principal amount of Subsequent Contracts purchased by the Trust and delivered to
the Trustee during the Funding Period will not be exactly equal to the Prefunded
Amount and that therefore there will be at least a nominal amount of principal
prepaid to Certificateholders.
OPTIONAL REDEMPTION
In order to avoid excessive administrative expense, the Servicer is
permitted at its option to purchase the remaining Contracts from the Trust on
any Distribution Date as of which the Pool Balance (after giving effect to the
Principal Distribution otherwise to be made on such Distribution Date) has
declined to 10% or less of the Original Pool Balance at a price equal to the
Aggregate Scheduled Balance of such Contracts on the date of repurchase plus
accrued interest on the Contracts and all amounts due to the Insurer under the
Insurance Agreement. The Trustee will give written notice of termination to each
Certificateholder of record. The final payment to any Certificateholder will be
made only upon surrender and cancellation of such Certificateholder's
Certificate at an office or agency of the Trustee specified in the notice of
termination. Any funds remaining in the Trust, after the Trustee has taken
certain measures to locate a Certificateholder and such measures have failed,
will be distributed to a charity designated by the Servicer.
CAPITALIZED INTEREST AGREEMENT AND CAPITALIZED INTEREST ACCOUNT
Simultaneously with the sale and assignment of the Contracts by the
Seller to the Trust, the Seller and the Trustee on behalf of the Trust will
enter into the Capitalized Interest Agreement, pursuant to which the Seller will
be obligated to pay the Capitalized Interest Amount, if any, on or before five
business days prior to each Distribution Date, ending with the _______, 199_
Distribution Date. The purpose of the Capitalized Interest Agreement is to cover
the shortfall between interest distributable on the portion of the Pool Balance
represented by the Prefunded Amount and interest which will be earned by the
Trust on the Prefunded Amount prior to the time it is used to purchase
Subsequent Contracts. The Capitalized Interest Agreement will be in effect from
the Closing Date until _________, 199_. Payments of the Capitalized Interest
Amounts due under the Capitalized Interest Agreement will be secured by funds on
deposit in a segregated trust deposit account (the "CAPITALIZED INTEREST
ACCOUNT") established in the name of ________________, acting as agent for the
benefit of the Certificateholders and the Insurer (in such capacity, the
"CAPITALIZED INTEREST AGENT"). The Capitalized Interest Account will be an
Eligible Account. Monies on deposit in the Capitalized Interest Account may be
invested in Eligible Investments in the manner described in the Agreement.
The amount required to be deposited in such Capitalized Interest
Account on the Closing Date will be the maximum aggregate Capitalized Interest
Amounts that may become owing under the Capitalized Interest Agreement, assuming
that, with respect to the Prefunded Amount during the Funding Period, a certain
rate of interest (set forth in the Agreement) is earned and no Subsequent
Contracts are acquired. The "CAPITALIZED INTEREST AMOUNT," with respect to any
Distribution Date for any Collection Period up through the last Collection
Period in the Funding Period, is an amount equal to (a) one month's interest on
the Prefunded Amount on deposit in the Prefunding Account as of the first day of
such Collection Period at the Pass-Through Rate plus (b) one-twelfth of the
premium for the Financial Guarantee Insurance Policy on the Prefunded Amount
minus (c) the earnings received by the Trustee during the related Collection
Period from investment of the Prefunded Amount on deposit in the Prefunding
Account. On each Subsequent Closing Date, an amount will be released to the
Seller from the Capitalized Interest Account so that the amount remaining in the
account after such release will equal the maximum Capitalized Interest Amount
which could become owing during the remainder of the Funding Period assuming
that no additional Subsequent Contracts are conveyed to the Trust. Any amounts
remaining on deposit in the Capitalized Interest Account after giving effect to
the payment on the Certificates on the ________, 199__ Distribution Date will be
released to the Seller on such date.
S-19
<PAGE> 59
THE FINANCIAL GUARANTEE INSURANCE POLICY
If on any Servicer Report Date with respect to any Distribution Date
the amount on deposit in the Collection Account after giving effect to all
amounts deposited to or payable from the Payahead Account with respect to such
Distribution Date, is less than the sum of the Servicing Fee, the Principal
Distribution and Interest Distribution for such Distribution Date, the Trustee,
by delivering a notice in accordance with the Financial Guarantee Insurance
Policy shall demand payment under the Financial Guarantee Insurance Policy in an
amount equal to such deficiency. The Insurer shall pay or cause to be paid such
amount to the Trustee for credit to the Collection Account. The Trustee shall
withdraw from the Collection Account and shall pay such amount to the
Certificateholders on the related Distribution Date.
If on the Business Day preceding the Final Distribution Date, any
principal amount of Certificates is still outstanding, then the Trustee shall
demand payment on the Financial Guarantee Insurance Policy in an amount equal to
the amount by which the outstanding principal amount of the Certificates, plus
interest thereon at the Pass-Through Rate, exceeds the amount on deposit in the
Collection Account which is available for distribution on the Final Distribution
Date. The Insurer shall pay or cause to be paid such amount to the Trustee
pursuant to the Trustee's instructions for credit to the Collection Account and
on the Final Distribution Date, the Trustee shall withdraw from the Collection
Account and shall pay such amount to the Certificateholders.
SALE AND ASSIGNMENT OF THE CONTRACTS
At the time of issuance of the Certificates, the Seller will sell and
assign to the Trustee, without recourse, the Seller's entire interest in the
Initial Contracts and the proceeds thereof, including its security interests in
the Initial Financed Vehicles. Concurrently with the sale and assignment of the
Initial Contracts, the Seller will sell and assign to the Trustee, against
payment therefor from the Prefunded Amount, all of the Seller's interest in the
Subsequent Contracts thereafter created and delivered to the Trustee. Each
Initial Contract will be identified in a schedule appearing as an exhibit to the
Agreement. The Trustee will, concurrently with such sale and assignment,
execute, authenticate and deliver the definitive certificates representing the
Certificates to the Underwriters against payment to the Seller of the net
purchase price of the sale of the Certificates. Pursuant to the applicable
respective Purchase Agreements, prior to sale of the Initial Contracts to the
Trustee and the issuance of the Certificates, Onyx and each Selling Subsidiary
will sell and assign to the Seller Onyx's and such Selling Subsidiaries' entire
interest in the Initial Contracts.
During the Funding Period, pursuant to the applicable Purchase
Agreement, Onyx and/or one or more Selling Subsidiaries will sell, and the
Seller will purchase, Subsequent Contracts. On each Subsequent Transfer Date,
Onyx or any such Selling Subsidiary will sell and assign to the Seller, without
recourse, its entire right, title and interest in and to Subsequent Contracts,
including its security interest in the Subsequent Financed Vehicles. The
purchase price to be paid to Onyx or any such Selling Subsidiary for each
Subsequent Contract will equal the principal balance thereof as of the related
Subsequent Transfer Date. Pursuant to the Agreement, the Seller will in turn
sell the Subsequent Contracts to the Trust. Each Subsequent Contract will be
sold to the Trust within two Business Days of its acquisition by Onyx. In
connection with each purchase of Subsequent Contracts, the Trust will be
required to pay to the Seller an amount equal to the amount paid by the Seller
to Onyx or any such Selling Subsidiary for such Subsequent Contracts, which
purchase price will be paid from monies on deposit in the Prefunding Account.
Each Subsequent Contract delivered to the Trustee on each Subsequent Transfer
Date will be accompanied by a certificate of the Seller (a "TRANSFER
CERTIFICATE") setting forth the aggregate principal balance of the related
Subsequent Contracts, the aggregate principal balance of the Subsequent
Contracts delivered to the Trustee during the Funding Period up to and including
such Subsequent Transfer Date and an affirmation of the representations and
warranties set forth in the Agreement with respect to the Seller and such
Subsequent Contracts. Upon the conveyance of Subsequent Contracts to the Trust
on a Subsequent Transfer Date, the Pool Balance will increase in an amount equal
to the aggregate Cut-Off Date Scheduled Balance of such Subsequent Contracts as
of the related Subsequent Transfer Date.
Each conveyance of Subsequent Contracts will be subject to the
following conditions, among others: (i) such Subsequent Contracts must satisfy
the Eligibility Requirements; (ii) such Subsequent Contracts were not selected
by Onyx or the Seller in a manner that either believes is adverse to the
interests of the Certificateholders or the Insurer; (iii) the weighted average
APR of the Contracts (after giving effect to the purchase of the related
Subsequent Contracts) is not less than ____%; (iv) the weighted average
remaining term of the Contracts (including the Subsequent Contracts) as of the
related Subsequent Transfer Date will not be greater than __ months; and (v) the
Seller and the Trustee shall
S-20
<PAGE> 60
not have been advised by either Rating Agency that the conveyance of such
Subsequent Contracts will result in a qualification, modification or withdrawal
of its then current rating of the Certificates.
On the Business Day preceding each Distribution Date during and
immediately following the Funding Period (each such date a "SUBSEQUENT CLOSING
DATE") UCC-1 financing statements will be filed naming the Seller as seller and
the Trustee as the purchaser with respect to the Subsequent Contracts delivered
to the Trustee since the preceding Subsequent Closing Date (or the Closing Date,
in the case of the first Subsequent Closing Date) and all legal opinions,
officers' certificates and other documentation necessary with respect to the
Subsequent Contracts delivered to the Trustee since the preceding Subsequent
Closing Date (or the Closing Date, as the case may be) will be executed and
delivered. Failure to comply with any of the conditions set forth in the
Agreement with respect to a Subsequent Closing Date will be deemed to be a
breach of a representation and warranty with respect to the Subsequent Contracts
to which such Subsequent Closing Date relates and accordingly the Seller will be
obligated to repurchase such Subsequent Contracts from the Trust as described
below.
Because the Subsequent Contracts will be originated after the Initial
Contracts, following their conveyance to the Trust, the characteristics of the
Contracts, including the Subsequent Contracts, may vary from those of the
Initial Contracts.
Pursuant to the Agreement, the Seller will represent to the Trustee
and the Trust for the benefit of holders of the Certificates and the Insurer
that: (i) each Contract contains or will contain customary and enforceable
provisions such that the rights and remedies of the holder thereof shall be
adequate for realization against the collateral of the benefits of the security;
(ii) each Contract and the sale of the related Financed Vehicle at the date of
origination complied or will comply in all material respects with all
requirements of applicable federal, state, and local laws, and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Federal Trade
Commission Act, the Fair Debt Collection Practices Act, the Fair Credit Billing
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and any other
consumer credit, equal opportunity and disclosure laws applicable to such
Contract and sale; (iii) each Contract constitutes or will constitute the legal,
valid, and binding payment obligation in writing of the Obligor, enforceable by
the holder thereof in all respects in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization, liquidation
and other similar laws and equitable principles relating to or affecting the
enforcement of creditors' rights; (iv) as of the Closing Date or related
Subsequent Transfer Date, as applicable, each Contract was or will be secured by
a validly perfected first priority security interest in the Financed Vehicle in
favor of the Seller as secured party or all necessary action with respect to
such Contract has been or will be taken to perfect a first priority security
interest in the related Financed Vehicle in favor of the Seller as secured
party, which security interest is or will be assignable and has been or will be
so assigned by the Seller to the Trust; (v) as of the Closing Date or related
Subsequent Transfer Date, as applicable, the Seller had or will have good and
marketable title to and was or will be the sole owner of each Contract, free of
liens, claims, encumbrances and rights of others; (vi) as of the Closing Date or
related Subsequent Transfer Date, as applicable, there are no rights of
rescission, offset, counterclaim, or defense, and the Seller had or will have
had no knowledge of the same being asserted or threatened, with respect to any
Contract; (vii) as of the Closing Date or related Subsequent Transfer Date, as
applicable, the Seller had or will have had no knowledge of any liens or claims
that have been filed, including liens for work, labor, materials or unpaid taxes
relating to a Financed Vehicle, that would be liens prior to, or equal or
coordinate with, the lien granted by the Contract; (viii) except for payment
defaults continuing for a period of not more than 30 days as of the Cut-Off Date
or related Subsequent Transfer Date, as applicable, the Seller has or will have
had no knowledge that a default, breach, violation, or event permitting
acceleration under the terms of any Contract exists, and the Seller has or will
have had no knowledge that a continuing condition that with notice or lapse of
time would constitute a default, breach, violation or event permitting
acceleration under the terms of any Contract exists, and the Seller has not
waived any of the foregoing; (ix) each Contract requires or will require that
the Obligor thereunder obtain comprehensive and collision insurance covering the
related Financed Vehicle; (x) each Contract was or will be acquired from a
dealer with whom Onyx ordinarily does business (except for Contracts originated
by Onyx); (xi) no adverse selection procedures were utilized in selecting the
Contracts; (xii) scheduled payments under each Contract have been or will be
applied in accordance with the method for allocating principal and interest set
forth in the Contract (either the Rule of 78's or Simple Interest Method); and
(xiii) there is or will be only one original of each Contract and such original
is or will be held by the Trustee as custodian on behalf of the Trust and
Insurer. As of the last day of the Collection Period following the Collection
Period (or, if the Seller elects, the last day of such Collection Period) during
which the Seller becomes aware
S-21
<PAGE> 61
or receives written notice from the Trustee or the Servicer that a Contract does
not meet any of the criteria in the Agreement and such failure materially and
adversely affects the interests of the Certificateholders or the Insurer in a
Contract, the Seller, unless it cures the failed criterion, will repurchase the
Contract from the Trustee at a price equal to the Scheduled Balance thereof plus
accrued interest (the "REPURCHASE AMOUNT"). The repurchase obligation will
constitute the sole remedy available to the Certificateholders or the Trustee
for the failure of a Contract to meet any of the criteria set forth in the
Agreement.
DISTRIBUTIONS
Subject to the last sentence of this paragraph, distributions on the
Certificates generally will be made on each Distribution Date by the Paying
Agent out of net collections on the Contracts (exclusive of amounts representing
payments due in the Collection Period in which such Distribution Date occurs and
any future Collection Periods) for the Collection Period preceding such
Distribution Date plus amounts payable from the Payahead Account, the Prefunding
Account and/or pursuant to the Capitalized Interest Agreement (including from
the Capitalized Interest Account). Such amount will be applied, first, to the
Servicer in payment of the Servicing Fee, second, to payment of the Interest
Distribution and the Principal Distribution to the Certificateholders on such
Distribution Date in accordance with the Agreement (including the distribution
of any Mandatory Partial Prepayment), third, to the Insurer, the premium for the
Financial Guarantee Insurance Policy, and fourth, any balance shall be
distributed to a separate spread account trust to be applied in accordance with
the spread account trust agreement and the Insurance Agreement, which provide
that to the extent funds are not required to reimburse the Insurer for draws on
the Financial Guarantee Insurance Policy, to satisfy obligations owing to the
Insurer or to reserve against the possibility of future draws, amounts remaining
shall be released to the beneficiaries of the spread account trust. Any amounts
distributed pursuant to clause fourth above will not be available to make
distributions to the Certificateholders on the current or any future
Distribution Date. Under the Financial Guarantee Insurance Policy, the Insurer
is obligated to provide for payment to the Trustee on each Distribution Date of
the amount, if any, by which the amount available for distribution from the net
collections on Contracts and amounts payable from the Payahead Account, the
Prefunding Account and/or pursuant to the Capitalized Interest Agreement
(including from the Capitalized Interest Account), is less than the sum of the
Servicing Fee, the Interest Distribution and the Principal Distribution due to
the Certificateholders for such Distribution Date. In addition, on the Final
Distribution Date, to the extent the amount on deposit and available in the
Collection Account, including amounts payable from the Payahead Account, is less
than all remaining unpaid interest and principal on the Certificates, the
Insurer is obligated to pay under the Financial Guarantee Insurance Policy or
cause to be paid the amount of such shortfall. In addition, on the Final
Distribution Date, to the extent the amount on deposit and available in the
Collection Account, including from the Payahead Account, is less than all
remaining unpaid interest and principal on the Certificates, the Insurer is
obligated to pay under the Financial Guarantee Insurance Policy or cause to be
paid the amount of such shortfall. See "--Distributions of Principal and
Interest" herein.
SERVICING FEE
The Servicer will be entitled to compensation for the performance of
its obligations under the Agreement. The Servicer shall be entitled to receive
on each Distribution Date an amount equal to the product of one-twelfth of ____%
per annum (the "SERVICING FEE RATE") multiplied by the Pool Balance (excluding
the Prefunded Amount) as of the end of the Collection Period preceding the
related Collection Period. As additional compensation, the Servicer or its
designee shall be entitled to retain all late payment charges, extension fees
and similar items paid in respect of the Contracts. The Servicer or its designee
will also receive as servicing compensation reinvestment earnings on Eligible
Investments (other than earnings on amounts on deposit in the Prefunding
Account) and the amount, if any, by which the outstanding principal balance
based on the Rule of 78's of a Contract that is subject to a Full Prepayment
exceeds the Scheduled Balance of such Contract. The Servicer shall pay all
expenses incurred by it in connection with its servicing activities under the
Agreement and shall not be entitled to reimbursement of such expenses except to
the extent they constitute Liquidation Expenses or expenses recoverable under an
applicable insurance policy.
WAIVERS AND EXTENSIONS
The Pooling and Servicing Agreement requires the Servicer to use its
best efforts to collect all payments called for under the terms and provisions
of the Contracts. The Servicer, consistent with the foregoing, will be
permitted, in its discretion, to waive certain changes and grant extensions as
described under "Description of the Transfer and Servicing Agreements - Waivers
and Extensions" in the Prospectus. The maturity date of a Contract, however, may
not
S-22
<PAGE> 62
be extended more than ____ days past the originally scheduled maturity date, and
in no event beyond the Class A-3 Final Scheduled Distribution Date.
DESCRIPTION OF THE INSURER
The following information with respect to the Insurer has been
furnished by the Insurer and none of Onyx, the Seller or the Underwriters have
made any independent investigation of such information.
The Insurer is domiciled in the State of _______ and licensed to do
business in and subject to regulation under the laws of all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. State laws regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by the Insurer,
changes in control and transactions among affiliates. Additionally, the Insurer
is required to maintain contingency reserves on its liabilities in certain
amounts and for certain periods of time.
As of December 31, 199_ the Insurer had admitted assets of $______
(audited), total liabilities of $______ (audited), and total capital and surplus
of $_______ (audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. As of
September 30, 199_, the Insurer had admitted assets of $_____ billion
(unaudited), total liabilities of $________ (unaudited), and total capital and
surplus of $________ (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities.
Furthermore, copies of the Insurer's year end financial statements
prepared in accordance with statutory accounting practices are available without
charge from the Insurer. A copy of the Annual Report on Form 10-K of the Company
is available from the Insurer or the Securities and Exchange Commission. The
address of the Insurer is ___________________. The telephone number of the
Insurer is __________.
The Financial Guarantee Insurance Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
Moody's rates the claims paying ability of the Insurer "____."
___________ rates the claims paying ability of the Insurer "____." Each such
rating of the Insurer should be evaluated independently. The ratings reflect the
respective rating agency's current assessment of the creditworthiness of the
Insurer and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Certificates, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the
Certificates. The Insurer does not guaranty the market price of the Certificates
nor does it guaranty that the ratings on the Certificates will not be revised or
withdrawn.
Audited financial statements of the Insurer as of December 31, 199__
and 199__ and for each of the three years in the period ended December 31, 199__
are included in this Prospectus Supplement beginning at F-1. Unaudited financial
statements of the Insurer for the nine-month periods ended September 30, 199_
and September 30, 199_ are included in this Prospectus beginning at F-__. Such
financial statements have been prepared on the basis of generally accepted
accounting principles. Copies of the Insurer's 199_ year-end audited financial
statements prepared in accordance with statutory accounting practices are
available from the Insurer.
S-23
<PAGE> 63
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each
distribution to each Certificateholder the Distribution Date Statement setting
forth for such Distribution Date the information described under "Description of
the Securities - Statements to Securityholders" in the Prospectus and the
following information:
(i) during the Funding Period, the Aggregate Scheduled
Balance of Subsequent Contracts transferred to the Trust
during such Collection Period;
(ii) during the Funding Period, the remaining amount on
deposit, if any, in the Prefunding Account, after giving
effect to (i) above;
(iii) at the end of the Funding Period, the amount of the
Mandatory Partial Prepayment; and
(iv) the amount, if any, required from the Insurer pursuant
to the Financial Guarantee Insurance Policy to pay any
shortfall in the amount available in the Collection
Account for payment.
CERTAIN MATTERS RELATING TO THE INSURER
Notwithstanding any provision in the Prospectus to the contrary, in
the event an Insurer Default shall have occurred and be continuing, the Insurer
shall not have the right to take any action under the Agreement, to terminate
the Servicer, or to control or direct the actions of the Seller, the Servicer or
the Trustee pursuant to the terms of the Agreement, nor shall the consent of the
Insurer be required with respect to any action (or waiver of a right to take
action) to be taken by the Seller, the Servicer, the Trustee or the
Certificateholders; provided, that the consent of the Insurer shall be required
at all times with respect to any amendment of the Agreement.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the Prospectus, the Certificates may be purchased by an
employee benefit plan or an individual retirement account (a "BENEFIT PLAN")
subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "CODE"). A fiduciary of a Benefit Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties under
ERISA and does not result in a nonexempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code.
The DOL has granted to ___________________________ an administrative
exemption (Prohibited Transaction Exemption __-__ (the "EXEMPTION")) from
certain of the prohibited transaction rules of ERISA with respect to the initial
purchase, the holding and the subsequent resale by Benefit Plans of certificates
representing interests in asset backed pass-through trusts that consist of
certain receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. On July 21, 1997, the DOL adopted an Amendment to
Prohibited Transaction Exemptions (Prohibited Transaction Exemption 97-34) that
modified the Exemption with respect to transactions, such as this one, that
utilize prefunding. The receivables covered by the Exemption include motor
vehicle installment obligations such as the Contracts.
Among the conditions that must be satisfied for the Exemption to
apply to the acquisition by a Benefit Plan of the Certificates are the
following:
(i) The acquisition of the Certificates by a Benefit Plan is on
terms (including the price for the Certificates) that are at least as favorable
to the Benefit Plan as they would be in an arm's-length transaction with an
unrelated party.
(ii) The rights and interests evidenced by the Certificates
acquired by the Benefit Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust.
S-24
<PAGE> 64
(iii) The Certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's, Moody's, Duff & Phelps Inc. or
Fitch Investors Service, Inc.
(iv) The Trustee is not an affiliate of any member of the
Restricted Group (as defined below).
(v) The sum of all payments made to the Underwriters in connection
with the distribution of the Certificates represents not more than reasonable
compensation for underwriting the Certificates. The sum of all payments made to
and retained by the Seller pursuant to the sale of the Contracts to the Trust
represents not more than the fair market value of such Contracts. The sum of all
payments made to and retained by the Servicer represents not more than
reasonable compensation for the Servicer's services under the Agreement and
reimbursement of the Servicer's reasonable expenses in connection therewith.
(vi) The Benefit Plan investing in the Certificates is an
"ACCREDITED INVESTOR" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act of 1933, as amended.
(vii) The principal amount of obligations added to the Trust after
the Closing Date does not exceed 25% of the principal balance of the
Certificates being offered as of the Closing Date.
(viii) All such additional obligations meet the same terms and
conditions for eligibility as the obligations originally included in the Trust
(which terms and conditions have been approved by one of the above-named rating
agencies) except that such terms and conditions may be modified with the prior
approval of a rating agency or of a majority of the holders of the certificates
offered.
(ix) The addition of the obligations during the funding period does
not result in a ratings downgrade.
(x) The weighted average annual percentage rate of all obligations
in the Trust at the end of the funding period is not more than 100 basis points
lower than such weighted average as of the closing date.
(xi) The characteristics of the additional obligations are
monitored by a third party credit enhancer or certificate insurer which is
independent of the sponsor of the Trust, or an independent accountant delivers a
letter (with copies to the relevant rating agencies, underwriters and trustee)
stating that the characteristics of the additional obligations conform to the
characteristics with respect thereto specified in the offering documents;
(xii) The funding period ends no later than 90 days after the
Closing Date.
(xiii) Amounts on deposit in the Prefunding Account and/or related
Capitalized Interest Account are invested only in investments permitted by the
relevant rating agencies that are (i) direct obligations of or fully guaranteed
by the United States or any agency or instrumentality thereof or (ii) rated (or
issued by an issuer rated) in one of the three highest generic rating categories
by the relevant rating agencies.
The Trust must also meet the following requirements:
(a) The corpus of the Trust must consist solely of assets
of the type that have been included in other investment pools.
(b) Certificates in such other investment pools must have
been rated in one of the three highest rating categories of Standard
& Poor's, Moody's, Duff & Phelps Inc. or Fitch Investors Service,
Inc. for at least one year prior to the Benefit Plan's acquisition of
certificates.
(c) Certificates evidencing interests in such other
investment pools must have been purchased by investors other than
Benefit Plans for at least one year prior to any Benefit Plan's
acquisition of certificates.
S-25
<PAGE> 65
The Exemption provides relief from certain self-dealing/conflict of
interest prohibited transactions that may occur when the Benefit Plan fiduciary
causes a Benefit Plan to acquire certificates in a trust in which the fiduciary
(or his affiliate) is an Obligor on the receivables held in the trust provided
that, among other requirements: (i) in the case of an acquisition in connection
with the initial issuance of Certificates, at least 50% of each class of
Certificates in which Benefit Plans have invested is acquired by persons
independent of the Restricted Group and at least 50% of the aggregate interest
in the trust is acquired by persons independent of the Restricted Group; (ii)
such fiduciary (or its affiliate) is an Obligor with respect to 5% or less of
the fair market value of the obligations contained in the trust; (iii) the
Benefit Plan's investment in Certificates does not exceed 25% of all of the
Certificates outstanding at the time of the acquisition; and (iv) immediately
after the acquisition, no more than 25% of the assets of the Benefit Plan are
invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by the Seller, the Underwriter, the Trustee, the
Servicer, the Insurer, any Obligor with respect to Contracts included in the
Trust constituting more than 5% of the aggregate unamortized principal balance
of the assets in the Trust, or any affiliate of such parties (the "RESTRICTED
GROUP").
The Seller believes that the Exemption will apply to the acquisition,
holding and resale of the Certificates by a Benefit Plan and that all conditions
of the Exemption other than those within the control of investors will be met.
However, there can be no assurance that the DOL or the Internal Revenue Service
will not take a contrary position, nor that such position will be sustained. One
or more alternative exemptions may be available with respect to certain
prohibited transactions to which the Exemption is not applicable, depending in
part upon the type of Benefit Plan's fiduciary making the decision to acquire
the Certificates and the circumstances under which such decision is made,
including, but not limited to, (a) Prohibited Transactions Class Exemption
("PTCE") 91-38, regarding investments by bank collective investment funds or (b)
PTCE 90-1, regarding investments by insurance company pooled separate accounts.
Before purchasing the Certificates, a Benefit Plan's fiduciary should consult
with its counsel to determine whether the conditions of the Exemption or any
other exemption would be met. A purchaser of the Certificates should be aware,
however, that even if the conditions specified in one or more exemptions are
met, the scope of the relief provided by the applicable exemption or exemptions
might not cover all acts that might be construed as prohibited transactions.
As described above, the acquisition of a Certificate by a Benefit
Plan could result in various unfavorable consequences for the Benefit Plan or
its fiduciaries under the regulations unless one of the exceptions in the
regulations or an exemption is available. See "ERISA Considerations" in the
Prospectus.
Prospective Benefit Plan investors should consult with their legal
advisors concerning the impact of ERISA and the Code, the applicability of the
Exemption or any other exemptions, and the potential consequences of any
purchase in their specific circumstances, prior to making an investment in a
Certificate. Any Benefit Plan which acquires a beneficial ownership interest in
Certificates will be deemed, by virtue of the acceptance and acquisition of such
ownership interest, to have represented to the Seller and the Trustee that such
Benefit Plan is an "ACCREDITED INVESTOR" for purposes of Rule 501(a)(1) of
Regulation D under the Securities Act.
A governmental plan as defined in Section 3(32) of ERISA is not
subject to ERISA or Code Section 4975. However, such a governmental plan may be
subject to federal, state or local law which is to a material extent similar to
the provisions of ERISA or Code Section 4975 ("SIMILAR LAW"). A fiduciary of a
governmental plan should make its own determination as to the need for and
availability of any exemptive relief under Similar Law.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated _________, 199__ (the "UNDERWRITING AGREEMENT") between the
Seller and the Underwriters named below (the "UNDERWRITERS"), the Seller has
agreed to sell to each of the Underwriters, and each of the Underwriters has
severally agreed to purchase, the principal amount of the Certificates set forth
opposite its name in the table below:
S-26
<PAGE> 66
<TABLE>
<CAPTION>
Principal
Amount of
UNDERWRITER Certificates
----------- ----------------
<S> <C>
$
$
Total............................................................ $
</TABLE>
The Seller has been advised by the Underwriters that they propose
initially to offer the Certificates to the public at the public offering price
set forth on the cover page of this prospectus and to certain dealers at such
price less a concession not in excess of ____% of the principal amount thereof.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of ____% of the principal amount of the Certificates on sales to certain
other dealers. After the initial public offering, the public offering price of
the Certificates and such concession and discount may be changed. The
Underwriters are obligated to purchase and pay for all of the Certificates if
any Certificates are purchased. The Underwriters currently intend, but are not
obligated, to make a market in the Certificates.
During and after the offering, the Underwriters may purchase and sell
the Certificates in the open market in transactions in the United States. These
transactions may include overallotment and stabilizing transactions and
purchases to cover short positions created in connection with the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the Certificates sold in the offering for their
account may by reclaimed by the Underwriters if such Certificates are
repurchased by the Underwriters in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Certificates, which may be higher than the price that might otherwise prevail in
the open market. These transactions may be effected in the over-the-counter
market or otherwise, and these activities, if commenced, may be discontinued at
any time.
The Seller and Onyx have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under applicable securities laws, or
contribute to payments the Underwriters may be required to make in respect
thereof.
LEGAL MATTERS
Certain matters with respect to the legality of the Certificates and
with respect to the federal income tax matters discussed under "Certain Federal
Income Tax Consequences" in the Prospectus will be passed upon for the Seller by
Andrews & Kurth L.L.P., Dallas, Texas. Certain legal matters with respect to the
Certificates will be passed upon for the Underwriters by
___________________________. Certain legal matters relating to the Financial
Guarantee Insurance Policy will be passed upon for the Insurer by
_________________________.
EXPERTS
The consolidated financial statements of _____________________ and
subsidiaries as of December 31, 199_ and 199_ and for each of the years in the
three-year period ended December 31, 199_ are included herein beginning on page
F-1 and have been audited by _____________, independent certified public
accountants, as set forth in their report thereon and are included in reliance
upon the authority of such firm as experts in accounting and auditing.
S-27
<PAGE> 67
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
"accredited investor"................................................................................S-25, S-26
"Aggregate Scheduled Balance Decline".................................................................S-3, S-17
"Aggregate Scheduled Balance".........................................................................S-3, S-18
"Agreement".................................................................................................S-1
"Benefit Plan".............................................................................................S-24
"Business Day"..............................................................................................S-2
"Capitalized Interest Account"........................................................................S-5, S-19
"Capitalized Interest Agent"...............................................................................S-19
"Capitalized Interest Agreement"............................................................................S-2
"Cede"......................................................................................................S-8
"Certificate Owner"...................................................................................S-8, S-17
"Certificates"...........................................................................................i, S-1
"Closing Date".........................................................................................S-4, S-9
"Code".....................................................................................................S-24
"Collection Period"............................................................................ S-3, S-17, S-17
"Commission".................................................................................................ii
"Contracts"........................................................................................i, S-2, S-11
"Cut-Off Date Scheduled Balance"............................................................................S-1
"Cut-Off Date"................................................................................................i
"Defaulted Contract"..................................................................................S-4, S-18
"Distribution Date".....................................................................................ii, S-2
"DTC"....................................................................................................i, S-8
"Eligibility Requirements".................................................................................S-14
"Eligible Account".........................................................................................S-18
"ERISA".....................................................................................................S-8
"Exchange Act"...............................................................................................ii
"Exemption"................................................................................................S-24
"Final Distribution Date"....................................................................................ii
"Financed Vehicles"................................................................................i, S-2, S-11
"Financial Guarantee Insurance Policy"...................................................................i, S-2
"Funding Period"............................................................................................S-4
"Initial Contracts".........................................................................................S-1
"Initial Financed Vehicles".................................................................................S-1
"Insurance Agreement".......................................................................................S-6
"Insurer"................................................................................................i, S-2
"Interest Distribution"...........................................................................ii, S-2, S-17
"Liquidated Contract".................................................................................S-4, S-18
"Mandatory Partial Prepayment"....................................................................S-4, S-5, S-9
"Monthly P&I".........................................................................................S-3, S-18
"Motor Vehicle Contracts"..................................................................................S-11
"Obligor"..................................................................................................S-10
"Onyx"...................................................................................................i, S-1
"Original Pool Balance".....................................................................................S-8
"Participants".............................................................................................S-17
"Payaheads".................................................................................................S-7
"Pool Balance"........................................................................................S-3, S-17
"Prefunded Amount"..........................................................................................S-4
"Prefunding Account" .................................................................................S-2, S-18
"Principal Distribution"..........................................................................ii, S-3, S-17
"PTCE".....................................................................................................S-26
"Record Date"............................................................................................. S-17
"Repurchase Amount"........................................................................................S-22
"Restricted Group".........................................................................................S-26
"Rule of 78's Contracts"..............................................................................S-7, S-13
"Scheduled Balance"...................................................................................S-3, S-18
"Security Insurance Policy".................................................................................S-6
"Seller".................................................................................................i, S-1
"Selling Subsidiary" ......................................................................................S-13
</TABLE>
S-28
<PAGE> 68
<TABLE>
<S> <C>
"Servicer Report Date"......................................................................................S-6
"Servicer"...............................................................................................i, S-1
"Servicing Fee Rate" .................................................................................S-6, S-22
"Servicing Fee".............................................................................................S-6
"Similar Law"..............................................................................................S-26
"Simple Interest Contracts"...........................................................................S-7, S-13
"Subsequent Closing Date".............................................................................S-7, S-21
"Subsequent Contracts".............................................................................i, S-2, S-11
"Subsequent Financed Vehicles".....................................................................i, S-2, S-11
"Subsequent Transfer Date"............................................................................S-2, S-11
"Tax Counsel"...............................................................................................S-8
"Transfer Certificate".....................................................................................S-20
"Trust Property"............................................................................................S-1
"Trustee".............................................................................................S-1, S-11
"Trust"............................................................................................i, S-1, S-11
"Underwriters".............................................................................................S-26
"Underwriting Agreement"...................................................................................S-26
</TABLE>
S-29
<PAGE> 69
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to the registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
PROSPECTUS
ONYX ACCEPTANCE AUTO LOAN TRUSTS
AUTO LOAN BACKED NOTES
AUTO LOAN PASS-THROUGH CERTIFICATES
ONYX ACCEPTANCE FINANCIAL CORPORATION,
SELLER
ONYX ACCEPTANCE CORPORATION,
SERVICER
The Auto Loan Backed Notes (the "NOTES") and the Auto Loan
Pass-Through Certificates (the "CERTIFICATES" and, together with the Notes, the
"SECURITIES") described herein may be sold from time to time in one or more
series, in amounts, at prices and on terms to be determined at the time of sale
and to be set forth in a supplement to this Prospectus (a "PROSPECTUS
SUPPLEMENT"). Each series of Securities, which may include one or more classes
of Notes and/or one or more classes of Certificates, will be issued by a trust
to be formed with respect to such series (each, a "TRUST"). Each Trust will be
formed pursuant to either a Trust Agreement to be entered into among Onyx
Acceptance Financial Corporation, as Seller (the "SELLER") and the Trustee
specified in the related Prospectus Supplement (the "TRUSTEE") or a Pooling and
Servicing Agreement to be entered into among the Trustee, the Seller and Onyx
Acceptance Corporation ("ONYX"), as Servicer (the "SERVICER"). If a series of
Securities includes Notes, such Notes will be issued and secured pursuant to an
Indenture between the applicable Trust and the Indenture Trustee specified in
the related Prospectus Supplement (the "INDENTURE TRUSTEE") and will represent
indebtedness of the related Trust. If a series of Securities includes
Certificates, such Certificates will represent undivided ownership interests in
the related Trust. The related Prospectus Supplement will specify which class or
classes of Notes, if any, and which class or classes of Certificates, if any, of
the related series are being offered thereby. The property of each Trust will
include a pool of motor vehicle retail installment sales contracts (the
"CONTRACTS") secured by new and/or used automobiles and/or light-duty trucks
(the "FINANCED VEHICLES"), certain monies due under the related Contracts on or
after the applicable Cut-Off Date specified in the related Prospectus
Supplement, security interests in the related Financed Vehicles and certain
other property, all as described herein and in the related Prospectus
Supplement.
(Continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" COMMENCING ON PAGE 6 HEREIN AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, ANY NOTES OF
A SERIES WILL REPRESENT [NON-RECOURSE] OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES WILL REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND WILL
NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND WILL NOT BE GUARANTEED OR
INSURED BY, THE SELLER, ONYX ACCEPTANCE CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not
be used to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is _____________, 199__
<PAGE> 70
(Continued from prior page)
Except as otherwise provided in the related Prospectus Supplement,
each class of Securities of any series will represent the right to receive
specified payments or distributions in respect of collections of principal and
interest on the related Contracts, at the rates, on the dates (each, a
"DISTRIBUTION DATE") and in the manner described herein and in the related
Prospectus Supplement. To the extent specified in the related Prospectus
Supplement (i) distributions of interest and principal on one or more classes of
Certificates of a series may be subordinated in priority of payment to interest
and principal due on one or more classes of the Notes, if any, of such series or
on one or more other classes of Certificates of such series and (ii) payments of
interest and principal on one or more classes of Notes of a series may be
subordinated in priority of payment to interest and principal due on one or more
of the other classes of Notes of such Series. A series may include one or more
classes of Notes and/or Certificates which differ as to the timing and priority
of payment, interest rate or amount of payments or distributions in respect of
principal or interest or both. A series may include one or more classes of Notes
or Certificates entitled to payments or distributions in respect of principal
with disproportionate, nominal or no interest payments or distributions, or to
interest payments or distributions with disproportionate, nominal or no payments
or distributions in respect of principal. The rate of payments in respect of
principal of any class of Notes and the rate of distributions in respect of
principal of any class of Certificates will depend on the priority of payment of
such class and the rate and timing of payments (including prepayments, defaults,
liquidations and repurchases of Contracts) on the related Contracts. A rate of
payment lower or higher than that anticipated may affect the weighted average
life of each class of Securities in the manner described herein and in the
related Prospectus Supplement.
-ii-
<PAGE> 71
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the
Securities and Exchange Commission (the "COMMISSION") a Registration Statement
(together with all amendments and exhibits thereto, referred to herein as the
"REGISTRATION STATEMENT") under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), with respect to the Notes and the Certificates offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information included in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of the
Registration Statement may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Servicer and each Trust, and
the address is http://www.sec.gov. The Servicer, on behalf of each Trust, will
also file or cause to be filed with the Commission such periodic reports as are
required under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") and the rules and regulations of the Commission thereunder, and such
reports can be obtained as described above. Such reports will include Current
Reports on Form 8-K filed after each Distribution Date, and an Annual Report on
Form 10-K. Such reports will contain certain financial information regarding
such Trust, including the Distribution Date Statement which will be furnished
monthly to Securityholders as described under "Reports to Securityholders"
below. Reports on Form 8-K and Form 10-K with respect to a Trust and the
Securities issued by such Trust will not be filed for any period which ends
after December 31 of the year in which the Securities are issued; however, the
related Securityholders will continue to receive the Distribution Date Statement
monthly, as described below.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller, as originator of any Trust,
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities, shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Seller at 8001 Irvine Center Drive, 6th Floor,
Irvine, California 92618 (Telephone: (949) 450-5500).
-iii-
<PAGE> 72
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. See the Index of Terms for the location herein
of the definitions of certain capitalized terms. An investment in the Securities
of any series involves various risks, and potential purchasers should carefully
consider the matters discussed under "Risk Factors" herein and in the related
Prospectus Supplement in considering an investment in the Securities of any
series.
ISSUER..................... With respect to each series of Securities, the
Trust to be formed (the "TRUST" or the "ISSUER")
pursuant to either a Trust Agreement (as amended
and supplemented from time to time, a "TRUST
AGREEMENT") among the Seller and the Trustee for
such Trust or a Pooling and Servicing Agreement
(as amended and supplemented from time to time,
the "POOLING AND SERVICING AGREEMENT") among the
Seller, the Servicer and the Trustee for such
Trust.
SELLER..................... Onyx Acceptance Financial Corporation (the
"SELLER"), a wholly-owned, limited purpose
subsidiary of Onyx Acceptance Corporation
("ONYX"). The Seller's principal executive
offices are located at 8001 Irvine Center Drive,
6th Floor, Irvine, California 92618 and its
telephone number is (949) 450-5500. See "The
Seller".
SERVICER................... Onyx. Onyx's principal executive offices are
located at 8001 Irvine Center Drive, 5th Floor,
Irvine, California 92618 and its telephone number
is (949) 790-5400. See "The Servicer".
TRUSTEE.................... With respect to each series of Securities, the
Trustee specified in the related Prospectus
Supplement.
INDENTURE TRUSTEE ......... With respect to any series of Securities that
includes one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement.
THE NOTES ................. A series of Securities may include one or more
classes of Notes which will be issued pursuant to
an Indenture between the applicable Trust and the
related Indenture Trustee (as amended and
supplemented from time to time, an "INDENTURE"),
and may not include any Certificates. The related
Prospectus Supplement will specify which class or
classes, if any, of Notes of a series are being
offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available
for purchase in denominations of $1,000 and
integral multiples thereof and will be available
in book-entry form only. Except as otherwise
specified in the related Prospectus Supplement,
Noteholders will be able to receive Definitive
Securities only in the limited circumstances
described herein. See "Description of the
Securities--Definitive Securities".
<PAGE> 73
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes will
have a stated Note Principal Balance specified in
the related Prospectus Supplement ("NOTE
PRINCIPAL BALANCE") and will accrue interest on
such Note Principal Balance at a specified rate
(with respect to each class of Notes, the
"INTEREST RATE"). Each class of Notes may have a
different Interest Rate, which may be a fixed,
variable or adjustable Interest Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Interest
Rate for each class of Notes, or the method for
determining such Interest Rate.
With respect to a series that includes two or
more classes of Notes, as specified in the
related Prospectus Supplement, each class may
differ as to the timing and priority of payments,
seniority, allocations of losses, Interest Rate
or amount of payments of principal or interest,
and payments of principal or interest in respect
of any such class or classes may or may not be
made upon the occurrence of specified events or
on the basis of collections from certain
designated Contracts. In addition, a series may
include one or more classes of Notes ("STRIP
NOTES") entitled to (i) principal payments with
disproportionate, nominal or no interest payments
or (ii) interest payments with disproportionate,
nominal or no principal payments.
If the Seller, the Servicer or a successor
thereto exercises its option to purchase the
Contracts of a Trust in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", the outstanding Notes
will be redeemed as set forth in the related
Prospectus Supplement.
THE CERTIFICATES .......... A series may include one or more classes of
Certificates and may not include any Notes. The
related Prospectus Supplement will specify which
class or classes, if any, of Certificates of a
series are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum denomination
of $1,000 and in integral multiples thereof and
will be available in book-entry form only. Except
as otherwise specified in the related Prospectus
Supplement, Certificateholders will be able to
receive Definitive Securities only in the limited
circumstances described herein. See "Description
of the Securities--Definitive Securities".
Unless otherwise specified in the related
Prospectus Supplement, each class of Certificates
will have a stated Certificate Principal Balance
specified in the related Prospectus Supplement
(the "CERTIFICATE PRINCIPAL BALANCE") and will
accrue interest on such Certificate Principal
Balance at a specified rate (with respect to each
class of Certificates, the "PASS-THROUGH RATE").
Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed, variable
or adjustable Pass-Through Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Pass-
-2-
<PAGE> 74
Through Rate for each class of Certificates or
the method for determining such Pass-Through
Rate.
With respect to a series that includes two or
more classes of Certificates, as specified in the
related Prospectus Supplement, each class may
differ as to timing and priority of
distributions, seniority, allocations of losses,
Pass-Through Rate or amount of distributions in
respect of principal or interest, and
distributions in respect of principal or interest
in respect of any such class or classes may or
may not be made upon the occurrence of specified
events or on the basis of collections from
certain designated Contracts. In addition, a
series may include one or more classes of
Certificates ("STRIP CERTIFICATES") entitled to
(i) distributions in respect of principal with
disproportionate, nominal or no interest
distributions or (ii) interest distributions with
disproportionate, nominal or no distributions in
respect of principal.
If a series of securities includes classes of
Notes, distributions in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Seller, the Servicer or a successor
thereto exercises its option to purchase the
Contracts of a Trust in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", the outstanding
Certificates will be redeemed as set forth in the
related Prospectus Supplement.
THE TRUST PROPERTY......... Unless otherwise specified in the related
Prospectus Supplement, the property of each Trust
(the "TRUST PROPERTY") will include: (i) a pool
of motor vehicle retail installment sales
contracts (the "CONTRACTS"), all of which are
secured by new and/or used automobiles and/or
light-duty trucks (the "FINANCED VEHICLES"), (ii)
certain documents relating to the Contracts,
(iii) certain monies due under the Contracts on
or after the Cut-Off Date specified in the
related Prospectus Supplement, (iv) security
interests in the related Financed Vehicles, and
the rights to receive proceeds from claims or
certain related insurance policies covering the
Financed Vehicles or the obligors, (v) all
amounts on deposit in certain trust accounts,
including the related Collection Account and any
other account identified in the applicable
Prospectus Supplement, including all Eligible
Investments credited thereto (but excluding any
investment income from Eligible Investments to be
paid to the Servicer), (vi) the benefits of any
form of credit enhancement identified in the
applicable Prospectus Supplement, (vii) the right
of the Seller to cause Onyx to repurchase certain
Contracts under certain circumstances, and (viii)
all proceeds of the foregoing. See "The Trusts".
-3-
<PAGE> 75
On or before the date of initial issuance of a
series of Securities (the related "CLOSING DATE")
as specified in the related Prospectus
Supplement, the Seller will sell or transfer
Contracts having an aggregate principal balance
specified in the related Prospectus
Supplement as of the date specified therein (the
"CUT-OFF DATE") to the applicable Trust pursuant
to, if such Trust is to be treated as an owner
trust for federal income tax purposes, the
related Sale and Servicing Agreement among the
Seller, the Servicer and the Trust (as amended
and supplemented from time to time, the "SALE AND
SERVICING AGREEMENT") or, if the Trust is to be
treated as a grantor trust for federal income tax
purposes, the related Pooling and Servicing
Agreement.
CONTRACTS.................. Unless otherwise specified in the related
Prospectus Supplement, all of the Contracts
included in the Trust Property of each Trust will
have been (i) originated by automobile
dealerships ("DEALERS") assigned to Onyx or
purchased or originated by subsidiaries of Onyx,
(ii) purchased by the Seller from Onyx or from a
subsidiary of Onyx (each such subsidiary, a
"SELLING SUBSIDIARY") and (iii) purchased by the
Trust from the Seller. See "The Onyx Portfolio of
Motor Vehicle Contracts". All of the Contracts
included in the Trust Property of each Trust will
have been selected based upon the criteria
specified in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable,
as described herein and in the related Prospectus
Supplement.
PREFUNDING ARRANGEMENTS.... If and to the extent provided in the related
Prospectus Supplement with respect to a series of
Securities, the related Sale and Servicing
Agreement or Pooling and Servicing Agreement may
provide for a commitment by the related Trust to
subsequently purchase additional Contracts
("SUBSEQUENT CONTRACTS") from the Seller
following the date on which the Trust is
established and the related Securities are issued
(a "PREFUNDING ARRANGEMENT"). See "Prefunding
Arrangements".
CREDIT AND CASH FLOW
ENHANCEMENT .............. If and to the extent specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Securities may include any one or more of the
following: a surety bond or financial guarantee
insurance policy (a "SECURITY INSURANCE POLICY")
provided by a third-party insurer (a "SECURITY
INSURER"), subordination of one or more classes
of Securities to one or more other classes of
securities, a reserve fund, a yield maintenance
account, over-collateralization, letters of
credit, credit or liquidity facilities,
guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase
obligations, cash deposits, other agreements or
arrangements with respect to third party
payments, or other support. Unless otherwise
specified in the related Prospectus Supplement,
any form of credit enhancement will have certain
limitations and exclusions from coverage
thereunder, which will be described in the
related Prospectus Supplement. See "Description
of the Transfer and Security Agreements--Credit
and Cash Flow Enhancement".
-4-
<PAGE> 76
TAX STATUS ................ Unless the Prospectus Supplement specifies that
the related Trust will be treated as a grantor
trust and except as otherwise provided in such
Prospectus Supplement, upon the issuance of the
related series of Securities, Tax Counsel to such
Trust will deliver an opinion to the effect that
for federal income tax purposes (a) any Notes of
such series will be characterized as debt and (b)
such Trust will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation. In respect of any such
series, each Noteholder, if any, by the
acceptance of a Note of such series, will agree
to treat such Note as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate of such series, will agree to treat
such Trust as a partnership in which such
Certificateholder is a partner for federal income
and California income and franchise tax purposes.
Alternative characterizations of such Trust and
such Certificates are possible, but would not
result in materially adverse tax consequences to
Certificateholders.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust
and except as otherwise provided in such
Prospectus Supplement, upon the issuance of the
related series of Certificates, Tax Counsel to
such Trust will deliver an opinion to the effect
that such Trust will be treated as a grantor
trust for federal income tax purposes and will
not be subject to federal income tax.
See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences With Respect To
Trusts For Which A Partnership Election Is Made"
for additional information concerning the
application of federal and California tax laws.
ERISA CONSIDERATIONS ...... Subject to the considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified therein, any Notes of a series and any
Certificates that are issued by a Trust that is a
grantor trust and are not subordinated to any
other class of Certificates are eligible for
purchase by employee benefit plans. Unless
otherwise specified in the related Prospectus
Supplement, the Certificates of any series that
are subordinated to any other Security of that
series may not be acquired by any employee
benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or by any individual retirement
account. See "ERISA Considerations" herein and in
the related Prospectus Supplement.
RATING..................... It will be a condition to the issuance of each
class of Securities specified as being offered by
the related Prospectus Supplement that such class
of Securities be rated in one of the four highest
generic rating categories established for such
Securities by at least one nationally recognized
statistical rating agency (each such rating
agency that rates a class of Securities being
referred to herein as a "RATING AGENCY").
-5-
<PAGE> 77
RISK FACTORS
CERTAIN LEGAL ASPECTS -- THE CONTRACTS; SECURITY INTERESTS IN FINANCED VEHICLES
Each transfer of Contracts to a Trust will be subject to the
perfection requirements of the Uniform Commercial Code ("UCC"), as in effect in
California. The Seller will take or cause to be taken such action as is required
to perfect such Trust's rights in the applicable Contracts and will warrant that
the Trust has good title, free and clear of liens and encumbrances, to each
Contract on the date such Contract is transferred to the Trust. Except as
otherwise specified in the related Prospectus Supplement, the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, will,
subject to the satisfaction of any conditions specified in the applicable
agreement, permit the Servicer to hold the Contracts on behalf of the Trustee
after the filing of UCC-1 financing statements relating to the perfection of
such Trust's security interest in the Contracts. Accordingly, if Onyx or the
Seller sell and deliver a Contract to another purchaser, there is a risk that
the purchaser could acquire an interest in the Contract superior to the interest
of such Trust and the Securityholders. Onyx will agree in the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, to take all
necessary action to preserve and protect such Trust's ownership interest in the
Contracts.
The Seller will represent that each Contract is secured by a Financed
Vehicle. After a Contract is purchased by Onyx, or purchased or originated by a
subsidiary of Onyx, and the appropriate application is processed by the
department of motor vehicles or similar state agency responsible for vehicle
records in the state in which the Contract was originated, the certificate of
title (or computerized title record in the case of certain of the Contracts
originated in California, for which there will be no paper certificates of
title) to the Financed Vehicle securing the Contract will show Onyx or such
subsidiary as the secured party holding a lien in the Financed Vehicle. When the
Contracts are sold to the Seller and then to a Trust, Onyx or such subsidiary
will remain the secured party named on the related certificates of title (or
computerized title records in the case of certain Contracts originated in
California), and such certificates (or electronic records) will not be endorsed
or otherwise marked to identify the related Trustee (or, if applicable, the
related Indenture Trustee) as secured party, due to the administrative burden
and expense of applying to the department of motor vehicles or similar state
agency in each of the states of Contract origination to identify the Trustee
(or, if applicable, the related Indenture Trustee) as secured party, and because
retaining Onyx's or such subsidiary's name as secured party enables Onyx to more
efficiently service the Contracts. Even though a Trust will not be identified as
secured party with respect to the Financed Vehicles relating to the Contracts
transferred to it, because such Trust will have a security interest in such
Contracts, it will be the beneficial owner of the security interests in the
related Financed Vehicles (which security interests, in the case of a series of
Securities including one or more classes of Notes, will be pledged to the
related Indenture Trustee). There exists a risk, however, in not identifying
such Trust (or, if applicable, the related Indenture Trustee) as the new secured
party on the certificate of title (or computerized title record) that, through
fraud or negligence, the security interest of such Trust could be released.
Moreover, statutory liens for repairs or unpaid taxes may have priority even
over perfected security interests in the Financed Vehicles. See "Certain Legal
Aspects of the Contracts".
CERTAIN LEGAL ASPECTS -- BANKRUPTCY CONSIDERATIONS
It is intended by Onyx, each Selling Subsidiary and the Seller that
each transfer of Contracts by Onyx or a Selling Subsidiary to the Seller
constitute a "true sale" of the applicable Contracts to the Seller. If such a
transfer constitutes a "true sale," the applicable Contracts and the proceeds
thereof would not be part of Onyx's or such Selling Subsidiary's bankruptcy
estate should it become the subject of a bankruptcy case subsequent to the
transfer of such Contracts to the Seller.
Onyx and the Seller have taken and will take steps in structuring the
transactions contemplated hereby that are intended to ensure that the voluntary
or involuntary application for relief by Onyx under the United States Bankruptcy
Code or similar state laws ("INSOLVENCY LAWS") will not result in consolidation
of the assets and liabilities of the Seller with those of Onyx. These steps
include the creation of the Seller as a separate, limited purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the prior unanimous affirmative vote of all of its
directors). However, there can be no assurance that the activities of the
-6-
<PAGE> 78
Seller would not result in a court concluding that the assets and liabilities of
the Seller should be consolidated with those of Onyx in a proceeding under any
Insolvency Law. If a court were to reach such a conclusion, then delays in
payments or distributions in respect of the Securities could occur or reductions
in the amounts of such payments or distributions could result. See "The Seller".
Unless otherwise provided in the related Prospectus Supplement, notwithstanding
the holding by a court that the assets and liabilities of the Seller should be
consolidated with those of Onyx in a proceeding under any insolvency law, any
related Security Insurer will remain unconditionally and irrevocably obligated
under the applicable Security Insurance Policy to guarantee principal and
interest payments and distributions on each Distribution Date.
PREPAYMENT CONSIDERATIONS
The weighted average life of the Securities of any series will
generally be influenced by the rate at which the principal balances of the
related Contracts are paid, which payment may be in the form of scheduled
amortization or prepayments. Prepayments on Simple Interest Contracts will
shorten the average life of such Contract and, therefore, of the series of
Securities related to such Contracts, because they will be paid or distributed
to the related Securityholders on the Distribution Date immediately following
the Collection Period in which such prepayments are received. Partial
prepayments on Rule of 78's Contracts will be treated as Payaheads and
accordingly will not affect the average life of such Contracts because such
payments will be held in the name of the related Trustee (or, if applicable, the
related Indenture Trustee), acting on behalf of the related obligors and
Securityholders, as their interest may appear, until paid or distributed in
accordance with the original schedule of payments for such Contracts.
Onyx has limited historical experience with respect to prepayments,
and is not aware of publicly available industry statistics that set forth
principal prepayment experience for retail installment sales contracts similar
to the Contracts. Onyx can make no prediction as to the actual prepayment rates
that will be experienced on the Contracts in either stable or changing interest
rate environments. See "Maturity and Prepayment Considerations".
SUBORDINATION; LIMITED ASSETS
To the extent specified in the related Prospectus Supplement (i)
distributions of interest and principal on one or more classes of Certificates
of a series may be subordinated in priority of payment to interest and principal
due on one or more classes of the Notes, if any, of such series or on one or
more other classes of Certificates of such series and (ii) payments of interest
and principal on one or more classes of Notes of a series may be subordinated in
priority of payment to interest and principal due on one or more of the other
classes of Notes of such Series. Moreover, each Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the related Contracts and the other assets described in the related
Prospectus Supplement. The Notes of any series will represent obligations solely
of, and the Certificates of any series will represent interests solely in, the
related Trust and neither the Notes nor the Certificates of any series will be
insured or guaranteed by the Seller or the Servicer or any of their respective
affiliates, the applicable Trustee, any Indenture Trustee or, except as
specified in the related Prospectus Supplement, any other person or entity.
Consequently, holders of the Securities of any series must rely for repayment
upon payments on the related Contracts and, if and to the extent available,
amounts available from the other assets specified in the related Prospectus
Supplement.
CONSUMER PROTECTION LAWS
The Contracts will be subject to federal and state consumer
protection laws which impose requirements with respect to the making, transfer,
acquisition, enforcement and collection of consumer loans. Such laws, as well as
any new laws or rules which may be adopted, may adversely affect the Servicer's
ability to collect on the Contracts. Any failure by the originator thereof to
have complied, or the Servicer to comply, with such requirements could adversely
affect the enforceability of the Contracts. With respect to each series of
Securities, the Seller will make representations and warranties relating to the
validity and enforceability of the related Contracts and its compliance with
applicable law in connection with its performance of the transactions
contemplated by the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable. Pursuant thereto, if the applicable Trust's
interest in a Contract is materially and adversely affected by the failure of
such Contract to comply with the applicable requirements of any consumer
protection law, the Seller will be obligated to repurchase such Contract. The
sole remedy if any such representation or
-7-
<PAGE> 79
warranty is not complied with and such noncompliance continues beyond the
applicable cure period will be that the Contracts affected thereby will be
required to be repurchased by the Seller. See "Description of the Transfer and
Servicing Agreements -- Repurchase of Contracts" and "Certain Legal Aspects of
the Contracts -- Repurchase Obligation".
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Security Owners will hold their Certificates or Notes, as applicable, through
the Depository Trust Company ("DTC"). Transfers within DTC will be in accordance
with DTC's usual rules and operating procedures So long as the Securities are
book-entry Securities ("BOOK-ENTRY SECURITIES"), such Securities will be
evidenced by one or more certificates registered in the name of a Participant of
DTC as the nominee of DTC. No Security Owner will be entitled to receive a
definitive certificate representing such person's interest, except in the event
that Definitive Securities are issued under the limited circumstances described
herein. Unless and until Definitive Securities for such series are issued,
holders of such Securities will not be recognized by the related Trustee (or, if
applicable, the related Indenture Trustee) as "CERTIFICATEHOLDERS",
"NOTEHOLDERS" or "SECURITYHOLDERS", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, holders of such Securities will only be able to exercise the rights of
Securityholders indirectly through DTC and its Participants. See "Description of
the Securities--Book-Entry Registration".
Since transactions in the Securities can be effected only through
DTC, Participants, Indirect Participants and certain banks, the ability of the
beneficial owner thereof to pledge such Securities to persons or entities that
do not participate in DTC, or otherwise to take actions in respect of such
Securities, may be limited due to lack of a physical certificate representing
such Securities.
Beneficial owners of Securities may experience some delay in their
receipt of payments or distributions of interest and principal since such
payments or distributions will be provided by the related Trustee (or, if
applicable, the related Indenture Trustee) to DTC and DTC will credit such
payments or distributions to the accounts of its Participants, which will
thereafter credit them to the accounts of the beneficial owners thereof either
directly or indirectly through Indirect Participants.
THE TRUSTS
With respect to each series of Securities, the Seller will establish
a separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the transactions described herein and in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the property of each Trust (the "TRUST PROPERTY") will
include: (i) the related Contracts, (ii) certain documents relating to such
Contracts, (iii) certain monies due under such Contracts on or after the related
Cut-Off Date, (iv) security interests in the related Financed Vehicles and the
rights to receive certain proceeds from claims on certain related insurance
policies covering such Financed Vehicles or the related obligors, (v) all
amounts on deposit in certain trust accounts, including the related Collection
Account and any other account identified in the related Prospectus Supplement,
including all Eligible Investments credited thereto (but excluding any
investment income from Eligible Investments to be paid to the Servicer or as
otherwise specified in the related Prospectus Supplement), (vi) the right of the
Seller to cause Onyx to repurchase certain Contracts under certain
circumstances, and (vii) all proceeds of the foregoing. To the extent specified
in the related Prospectus Supplement, a Security Insurance Policy, reserve fund
or other form of credit enhancement may be a part of the property of any given
Trust or may be held by the Trustee or an Indenture Trustee for the benefit of
holders of the related Securities.
-8-
<PAGE> 80
Prior to formation, each Trust will have had no assets or
obligations. After formation, each Trust will not engage in any activity other
than acquiring and holding the related Contracts, issuing the related
Securities, distributing payments in respect thereof and as otherwise described
herein, in the related Prospectus Supplement and in the Trust Agreement or
Pooling and Servicing Agreement, as applicable. Each Trust will not acquire any
Motor Vehicle Contracts or assets other than the Trust Property.
The principal offices of each Trust that is not a grantor trust and
the related Trustee will be specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust and, if applicable, the Indenture Trustee,
will be specified in the related Prospectus Supplement. The Trustee's and, if
applicable, the Indenture Trustee's liability in connection with the issuance
and sale of the related Securities will be limited solely to the express
obligations of such Trustee or Indenture Trustee set forth in the related Trust
Agreement, Sale and Servicing Agreement, and Indenture or the related Pooling
and Servicing Agreement, as applicable. A Trustee or Indenture Trustee with
respect to a series of Securities may resign or be removed under the
circumstances specified in the related Prospectus Supplement. Any resignation or
removal of a Trustee or Indenture Trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by such successor.
THE ONYX PORTFOLIO OF MOTOR VEHICLE CONTRACTS
PURCHASE AND ORIGINATION OF MOTOR VEHICLE CONTRACTS
Onyx's portfolio of retail installment sales contracts and
installment loan agreements are secured by new and used automobiles and
light-duty trucks ("MOTOR VEHICLE CONTRACTS"). Motor Vehicle Contracts in Onyx's
portfolio are purchased by Onyx from Dealers that originate such contracts,
purchased by a subsidiary of Onyx from credit unions that originate such
contracts, or originated by Onyx or a subsidiary of Onyx. Unless otherwise
specified in the related Prospectus Supplement (i) substantially all of the
Contracts included in the Trust Property of a Trust will have been purchased by
Onyx from new and used car Dealers unaffiliated with Onyx and the Seller, and a
limited number of Contracts will have been purchased or originated by
subsidiaries of Onyx and (ii) all of such Contracts will have been sold to the
Seller and then to such Trust. Onyx currently has agreements with over _____
Dealers, of which approximately ______% are franchised new car dealerships and
approximately _____% are independent used car dealerships. The Dealers are
located in metropolitan areas in the states in which the Motor Vehicle Contracts
are or will be originated, which are ___________, ______________, ______________
and ____________________. Each Dealer or credit union from which Onyx or a
subsidiary of Onyx purchases Motor Vehicle Contracts has entered into an
agreement with Onyx or such subsidiary whereby the applicable seller represents
that it will comply with federal and state laws regarding motor vehicle
financing, that such seller will obtain the requisite financial information
required of the obligor in order to extend credit, and that such seller will
truthfully disclose to Onyx or such subsidiary such financial information, the
identity of the obligor and other information in connection with the loan
transaction. The Dealers with whom Onyx has agreements and Dealers with whom
Onyx would like to have agreements are regularly contacted by Onyx account
managers by telephone and in person in an effort to obtain a continued supply of
Motor Vehicle Contracts for Onyx to purchase. Before purchasing Motor Vehicle
Contracts from independent used car Dealers, Onyx completes a credit review of
the Dealer's financial condition (including a review of financial information
provided by the Dealer and a Dun & Bradstreet report on the Dealer) and a review
of the underwriting criteria used by the Dealer. The payment obligations of the
obligor under each Motor Vehicle Contract are secured by the vehicle purchased
with the loan proceeds provided under that Motor Vehicle Contract.
-9-
<PAGE> 81
Onyx services all of the Motor Vehicle Contracts and initially will
serve as the primary servicer of the Contracts included in the Trust Property of
a Trust after such Contracts are sold by the Seller to such Trust. The servicing
functions performed by Onyx include customer service, document filekeeping,
computerized account record keeping, vehicle title processing and collections.
UNDERWRITING OF MOTOR VEHICLE CONTRACTS
Onyx underwrites Motor Vehicle Contracts purchased from Dealers
through its twelve regional contract purchasing offices ("AUTO FINANCE
CENTERS"), five of which are in California and one in each of Arizona, Florida,
Georgia, Illinois, Michigan, Nevada and Washington. Motor Vehicle Contracts
purchased from Dealers in other states are generally purchased by the Auto
Finance Center that is geographically most proximate to the state of
origination. In the case of Motor Vehicle Contracts originated by a subsidiary
of Onyx, such Motor Vehicle Contracts are underwritten at the Irvine, California
Auto Finance Center location. Each Motor Vehicle Contract is fully amortizing
and provides for level payments over its term with the portion of principal and
interest of each level payment determined either on the basis of the Rule of
78's or the Simple Interest Method. See "The Contracts".
To evaluate the potential purchase of a Motor Vehicle Contract
originated by a Dealer, Onyx reviews the application package received from such
Dealer, or in the case of Motor Vehicle Contracts purchased or originated by a
subsidiary of Onyx, such subsidiary reviews the application package received
from the originating credit union or the obligor, that in any case sets forth
the obligor's income, liabilities, credit and employment history, and other
personal information, as well as a description of the financed vehicle that
secures the Motor Vehicle Contract. Most credit applications are not made on
forms provided by Onyx or a subsidiary of Onyx. However, Onyx or a subsidiary of
Onyx reviews the related application for completeness and for compliance with
Onyx's underwriting guidelines and applicable federal and state consumer
statutes and regulations. To evaluate credit applications, Onyx or a subsidiary
of Onyx reviews information in the application and from credit bureau reports
obtained by Onyx or such subsidiary.
Each proposed Motor Vehicle Contract is evaluated using uniform
underwriting standards developed by Onyx. These underwriting standards are
intended to assess the obligor's ability to repay all amounts due under the
Motor Vehicle Contract and the adequacy of the related financed vehicle as
collateral, based upon a review of the information contained in the Motor
Vehicle Contract application. Among the criteria considered by credit managers
of Onyx and its subsidiaries in evaluating the individual applications are (i)
stability of the obligor with specific regard to the obligor's occupation,
length of employment and length of residency, (ii) the obligor's payment history
based on information known directly or as provided by various credit reporting
agencies with respect to present and past debt, (iii) a debt service-to-gross
monthly income ratio test, and (iv) the principal amount of the Motor Vehicle
Contract taking into account the age, type and market value of the related
financed vehicle. The general policy of Onyx and its subsidiaries has been not
to allow an obligor's debt service-to-gross monthly income ratio to exceed 45%.
After review of an application, a credit manager, via an electronic
system, communicates an appropriate decision to the applicable Dealer or credit
union, or by telephone or otherwise to the obligor in the case of Motor Vehicle
Contracts originated by a subsidiary of Onyx, specifying approval (subject to
the receipt of the required documentation), denial or a counter-offer on the
proposed Motor Vehicle Contract. If the response to the Dealer, credit union or
obligor requires stipulations to the approval (including an additional
downpayment, reduction in the term of the financing, or the addition of a
co-signer to the Motor Vehicle Contract), these are communicated concurrently to
the Dealer, credit union or obligor, and become a condition of the approval.
Subsequent to approval, if Onyx or a subsidiary of Onyx is the chosen source of
financing, Onyx or such subsidiary will obtain the necessary documentation for
processing, which consists of the following: (i) a signed application; (ii) the
only original and a copy of the executed Motor Vehicle Contract; (iii) an
agreement by the obligor to provide insurance; (iv) a report of sale or
guarantee of title; (v) an application for registration; (vi) a co-signer
notification (if applicable); (vii) a copy of any supplemental warranty
purchased with respect to the financed vehicle; (viii) acceptable vehicle
valuation documentation; and (ix) any other required documentation.
-10-
<PAGE> 82
Once the appropriate documentation is in hand for funding, the file
relating to the Motor Vehicle Contract is ready to forward to a contract
processor for a pre-funding audit. The contract processor (who is employed by
Onyx or one of its subsidiaries) then audits such documents for completeness and
consistency with the application, providing final approval for purchase of the
Motor Vehicle Contract once these requirements have been satisfied (subject to
the receipt of the required documentation).
The amount advanced by Onyx or a subsidiary of Onyx under any Motor
Vehicle Contract does not exceed (i) for a new financed vehicle, the
manufacturer's suggested retail price plus taxes, title and license fees,
extended warranty (if any) and credit insurance, or (ii) for a used financed
vehicle, the value assigned by a nationally recognized used car value guide,
plus taxes, title and license fees and extended warranty (if any). However, the
actual amount advanced for a Motor Vehicle Contract is often less than the
maximum permissible amount depending on a number of factors, including the
length of the Motor Vehicle Contract term and the model and year of the related
financed vehicle. These adjustments are made to assure that the related financed
vehicle constitutes adequate collateral to secure the Motor Vehicle Contract.
Under no circumstances is the amount advanced for a Motor Vehicle Contract
greater than the amount payable by the obligor with respect to the purchase of
the related financed vehicle.
Periodically, Onyx makes a detailed analysis of its portfolio of
Motor Vehicle Contracts (including Motor Vehicle Contracts purchased or
originated by its subsidiaries) to evaluate the effectiveness of Onyx's credit
guidelines. If external economic factors, credit delinquencies or credit losses
change, Onyx adjusts its credit guidelines to maintain the asset quality deemed
acceptable by Onyx's management. Onyx reviews, on a daily basis, the quality of
its Motor Vehicle Contracts by conducting audits of certain randomly selected
Motor Vehicle Contracts to ensure compliance with established policies and
procedures.
INSURANCE
Each related Motor Vehicle Contract requires the obligor to obtain
comprehensive and collision insurance with respect to the related financed
vehicle with Onyx or a subsidiary of Onyx as a loss payee. Onyx tracks whether
obligors maintain the required insurance.
COLLECTION PROCEDURES
Collection activities with respect to delinquent Motor Vehicle
Contracts are performed by Onyx at its Irvine Collection Center. Collection
activities include prompt investigation and evaluation of the causes of any
delinquency. An obligor is considered delinquent when he or she has failed to
make at least 90% of a scheduled payment under the Motor Vehicle Contract within
30 days of the related due date (each a "DUE DATE").
To automate its collection procedures, Onyx uses features of the
computer system of its third party service bureau, Online Computer Systems, Inc.
("OCS") to provide tracking and notification of delinquencies. The collection
system provides relevant obligor information (for example, current addresses,
phone numbers and loan information) and records of all Motor Vehicle Contracts.
The system also records an obligor's promise to pay and affords supervisors the
ability to review collection personnel activity and to modify collection
priorities with respect to Contracts. Onyx utilizes a predictive dialing system
located at the Irvine Collection Center to make phone calls to obligors whose
payments are past due by more than eight days but less than 30 days. The
predictive dialer is a computer-controlled telephone dialing system which dials
phone numbers of obligors from a file of records extracted from Onyx's database.
By eliminating time wasted on attempting to reach obligors, the system gives a
single collector, on average, the ability to speak with and work 200 to 250
accounts per day. Once a live voice responds to the automated dialer's call, the
system automatically transfers the call to a collector and the relevant account
information to the collector's computer screen. The system also tracks and
notifies collections management of phone numbers that the system has been unable
to reach within a specified number of days, thereby promptly identifying for
management all obligors who cannot be reached by telephone.
-11-
<PAGE> 83
Once an Obligor is 20 days or more delinquent, the account is
assigned to a specific collector at the Irvine Collection Center who will have
primary responsibility for such delinquent account until it is resolved. To
expedite collections from late paying obligors, Onyx uses Western Union "Quick
Collect," which allows an obligor to pay at numerous locations any late payments
which are in turn wired daily to Onyx's lockbox account by Western Union. Onyx
also uses an automatic payment system that allows an obligor to authorize Onyx
to present a draft on the obligor's bank account directly to the obligor's bank
for payment to Onyx.
Generally, after a scheduled payment under a Motor Vehicle Contract
continues to be past due for between 45 and 60 days, Onyx will initiate
repossession of the financed vehicle. However, if the applicable Motor Vehicle
Contract is deemed uncollectible, if the related financed vehicle is deemed by
collection personnel to be in danger of being damaged, destroyed or made
unavailable for repossession, or if the related obligor voluntarily surrenders
the related financed vehicle, Onyx may repossess the related Financed Vehicle
without regard to the length or existence of payment delinquency. Repossessions
are conducted by third parties who are engaged in the business of repossessing
vehicles for secured parties. Under the laws of California and most other states
in which Motor Vehicle Contracts are originated, after repossession, the obligor
generally has an additional period of 10 to 15 days to redeem a financed vehicle
before it may be resold by Onyx in an effort to recover the balance due under
the Motor Vehicle Contract.
Losses may occur in connection with delinquent Motor Vehicle
Contracts and can arise in several ways, including inability to locate the
related financed vehicle or the obligor, or because of a discharge of the
obligor in a bankruptcy proceeding. The current policy of Onyx is to recognize
losses at the time a Motor Vehicle Contract is deemed uncollectible or during
the month a scheduled payment under a Motor Vehicle Contract becomes 120 days or
more past due, whichever occurs first.
Upon repossession and sale of a financed vehicle, any deficiency
remaining is pursued against the Obligor to the extent deemed practical by Onyx
and to the extent permitted by law. The loss recognition and collection policies
and practices of Onyx may change over time in accordance with Onyx's business
judgment. However, the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, will require that Onyx service the Contracts and
collect all amounts due using reasonable care and in at least the same manner as
it services and collects amounts due with respect to Motor Vehicle Contracts
serviced by it for its own account.
MODIFICATIONS AND EXTENSIONS
Onyx offers certain credit-related extensions to obligors. Generally,
these extensions are offered only when (i) Onyx believes that the obligor's
financial difficulty has been resolved or will no longer impair the Obligor's
ability to make future payments, (ii) the extension will result in the Obligor's
payments being brought current, (iii) the total number of credit-related
extensions granted on the Motor Vehicle Contract will not exceed three and the
total credit-related extensions granted on the Motor Vehicle Contract will not
exceed three months in the aggregate, (iv) there has been no more than one
credit-related extension granted on the Motor Vehicle Contract in the
immediately preceding twelve months, and (v) Onyx (or its assignee) had held the
Motor Vehicle Contract for at least six months. Any deviation from this policy
requires the concurrence of a collection supervisor and Onyx's collection
manager and the Executive Vice President, Collections.
DELINQUENCY AND LOAN LOSS INFORMATION
Certain information concerning the experience of Onyx pertaining to
delinquencies, loan losses and recoveries with respect to its portfolio of Motor
Vehicle Contracts (including receivables previously sold which Onyx continues to
service) will be set forth in each Prospectus Supplement. There can be no
assurance that the delinquency, loan loss and recovery experience on any
Contracts related to a series of Securities will be comparable to prior
experience or to such information.
-12-
<PAGE> 84
THE CONTRACTS
Unless otherwise specified in the related Prospectus Supplement (i)
all of the Contracts will have been purchased by the Seller from Onyx or a
Selling Subsidiary and (ii) substantially all of the Contracts will have been
purchased by Onyx from new and used car Dealers unaffiliated with Onyx or the
Seller, and a limited number of Contracts will have been purchased or originated
by subsidiaries of Onyx. See "The Onyx Portfolio of Motor Vehicle Contracts".
Unless otherwise specified in the related Prospectus Supplement, each of the
Contracts included in the Trust Property of a Trust will be a fixed rate
contract where the allocation of each payment between interest and principal is
calculated using the Rule of 78's (the "RULE OF 78'S CONTRACTS") or the Simple
Interest Method (the "SIMPLE INTEREST CONTRACTS"). Rule of 78's Contracts
provide for the payment by the obligor of a specified total amount of payments,
payable in equal monthly installments, which total represents the principal
amount financed plus add-on interest in an amount calculated as if such Contract
were a self-amortizing, level-yield Contract bearing interest at a per annum
rate equal to the stated annual percentage rate as set forth in the Contract
("APR"). Under the Rule of 78's, the amount of each payment allocable to
interest on a Contract is determined by multiplying the total amount of add-on
interest payable over the term of the Contract by a fraction derived as
described below. The fraction used in the calculation of add-on interest earned
each month under a Rule of 78's Contract has as its denominator a number equal
to the sum of a series of numbers representing the total number of monthly
payments due under such Contract. For example, with a Rule of 78's Contract
providing for 12 payments, the denominator of each month's fraction will be 78,
the sum of the series of numbers from 1 to 12. The numerator of the fraction for
a given month is the number of payments remaining before giving effect to the
payment to which the fraction is being applied. Accordingly, in the example of a
twelve-payment Rule of 78's Contract, the fraction for the first payment is
12/78, for the second payment 11/78, for the third payment 10/78, and so on
through the final payment, for which the fraction is 1/78. The applicable
fraction is then multiplied by the total add-on interest payment over the entire
term of such Contract, and the resulting amount is the amount of add-on interest
earned that month. The difference between the amount of the monthly payment by
the obligor and the amount of earned add-on interest calculated for the month is
applied to principal reduction.
For Simple Interest Contracts, interest due is calculated on the Due
Date based on the actual principal balance of the Contract on that date (the
"SIMPLE INTEREST METHOD"). For such Contracts, interest accrued as of the Due
Date is paid first, and then the remaining payment is applied to the unpaid
principal balance. Accordingly, if an obligor pays the fixed monthly installment
in advance of the Due Date, the portion of the payment allocable to interest for
the period since the preceding payment will be less than it would be if the
payment were made on the Due Date, and the portion of the payment allocable to
reduce the principal balance will be correspondingly greater. Conversely, if an
obligor pays the fixed monthly installment after its Due Date, the portion of
the payment allocable to interest for the period since the preceding payment
will be greater than it would be if the payment were made on the Due Date, and
the portion of the payment allocable to reduce the principal balance will be
correspondingly smaller. When necessary, an adjustment is made at the maturity
of the Contract to the scheduled final payment to reflect the larger or smaller,
as the case may be, allocations of payments to the amount financed under the
Contract as a result of early or late payments, as the case may be.
Unless otherwise specified in the related Prospectus Supplement, the
purchase price paid by each Trust for each Contract included in the Trust
Property of such Trust will reflect the principal balance of such Contract as of
the Cut-Off Date, calculated either under the Rule of 78's or the Simple
Interest Method. For each of the Contracts the term "CUT-OFF DATE SCHEDULED
BALANCE" means the principal balance of such Contract as of the Cut-Off Date.
For Rule of 78's Contracts a greater portion of the early payments under a
Contract is allocated to interest than would be the case using the actuarial
method. Therefore, the Cut-Off Date Scheduled Balance of each Rule of 78's
Contract will exceed the amount that would have been its principal balance as of
the Cut-Off Date if each such Rule of 78's Contract had been amortized from
origination under the actuarial method. The related Trustee (or, if applicable,
Indenture Trustee) and the Servicer will account for interest and principal on
the Rule of 78's Contracts using the actuarial method, but based on the Cut-Off
Date Scheduled Balance. The remaining payments due on a Rule of 78's Contract
will not be sufficient to amortize the Cut-Off Date Scheduled Balance of such
Contract at a yield equal to its APR. Accordingly, in order to amortize the
Cut-Off Date Scheduled Balance over the remaining term of the Rule of 78's
Contract using the actuarial method of accounting, the Servicer will recompute
the effective yield of such Contract based on the remaining payments due and the
Cut-Off Date Scheduled Balance (such yield, stated as a per annum rate, the
"RECOMPUTED YIELD") and will
-13-
<PAGE> 85
allocate each scheduled payment of principal and
interest ("MONTHLY P&I") between principal and interest on each Rule of 78's
Contract based on the Cut-Off Date Scheduled Balance and the Recomputed Yield
for such Contract (such method, the "RECOMPUTED ACTUARIAL METHOD").
Additional information with respect to the Contracts relates to any
series of Securities will be set forth in the related Prospectus Supplement,
including, to the extent appropriate, the composition, the distribution by APR
and by the states of origination, the portion of such Contracts consisting of
Simple Interest Contracts and Rule of 78's Contracts, and the portion of such
Contracts secured by new vehicles and by used vehicles.
PREFUNDING ARRANGEMENTS
To the extent provided in the related Prospectus Supplement for a
series of Securities, the related Trust Agreement, Sale and Servicing Agreement
and Indenture or the related Pooling and Servicing Agreement, as applicable, may
provide for a commitment by the related Trust to subsequently purchase
additional Contracts ("SUBSEQUENT CONTRACTS") from the Seller following the date
on which the Trust is established and the related Securities are issued (a
"PREFUNDING ARRANGEMENT"). With respect to a series of Securities, the
Prefunding Arrangement will require that any Subsequent Contracts transferred to
the Trust conform to the requirements and conditions provided in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable.
If a Prefunding Arrangement is utilized in connection with the issuance of a
series of Securities, the Servicer will establish an account in the name of the
related Trustee or Indenture Trustee, as applicable, for the benefit of the
Securityholders into which all or a portion of the net proceeds received from
the sale of the Securities (the "PREFUNDED AMOUNT") will be deposited and from
which monies will be released during a specified period to purchase subsequent
Contracts from the Seller (the "PREFUNDING ACCOUNT"). Upon each conveyance of
Subsequent Contracts to the applicable Trust, an amount equal to the purchase
price paid by the Seller to Onyx, or a Selling Subsidiary, for such Subsequent
Contracts will be released from the Prefunding Account and paid to the Seller.
The utilization of a Prefunding Arrangement for a series of
Securities is intended to improve the efficiency of the issuance of such
Securities and the sale of the Contracts to the related Trust through the
incremental delivery of the applicable Contracts on the Closing Date and during
a specified period following the Closing Date for such series of Securities,
which allows for a more even accumulation of the Contracts by the Seller and by
Onyx and the Selling Subsidiary and the issuance of a larger principal amount of
Securities than would be the case without a Prefunding Arrangement.
MATURITY AND PREPAYMENT ASSUMPTIONS
The Contracts will be prepayable in full by the obligors at any time
without penalty. Prepayments on Simple Interest Contracts included in the Trust
Property of a Trust will be paid or distributed to the related Securityholders
on the Distribution Date following the Collection Period in which they are
received. Partial prepayments on Rule of 78's Contracts however will be treated
as Payaheads and will not be paid or distributed until the Collection Period in
which such payments are due or until the amount of such partial prepayment
equals the amount the obligor would be required to pay in order to prepay the
Contract in full. See "Description of the Transfer and Servicing Agreements --
Payahead Account". To the extent that any Contract included in the Trust
Property of a Trust is prepaid in full ("FULL PREPAYMENT"), whether by the
obligor, or as the result of a purchase by the Servicer or a repurchase by the
Seller or otherwise, the actual weighted average life of the Contracts included
in the Trust Property of such Trust will be shorter than a weighted average life
calculation based on the assumptions that payments will be made on schedule and
that no prepayments will be made. Weighted average life means the average amount
of time in which each dollar of principal on a Contract is repaid. Full
Prepayments may also result from liquidations due to default, receipt of
proceeds from theft, physical damage, credit life and credit disability
insurance policies, repurchases by the Seller as a result of the failure of a
Contract to meet certain criteria set forth in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as
-14-
<PAGE> 86
applicable, or purchases by the Servicer as a result of a breach of certain of
its covenants with respect to the Contracts made by it in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable. In
addition, early retirement of the Securities may be effected by the option of
the Servicer to purchase the remaining Contracts included in the Trust Property
of the Trust on any Distribution Date as of which the related Pool Balance
(after giving effect to the principal payments and distributions otherwise to be
made on such Distribution Date) has declined to the percentage of the Original
Pool Balance specified in the related Prospectus Supplement. See "Description of
the Transfer and Servicing Agreements -- Repurchase of Contracts".
The rate of Full Prepayments by obligors on the Contracts may be
influenced by a variety of economic, social and other factors, including the
fact that an obligor may not sell or transfer the Financed Vehicle securing a
Contract without the consent of the Servicer. These factors may also include
unemployment, servicing decisions, seasoning of loans, destruction of vehicles
by accident, sales of vehicles and market interest rates.
California law, and the law of some other states, require that retail
installment sales contracts such as the Contracts permit full prepayment without
penalty. Any Full Prepayments reduce the average life of the Contracts. The
Servicer will permit the sale or other transfer of a Financed Vehicle without
accelerating the maturity of the related Contract if such Contract is assumed by
a person satisfying Onyx's then current underwriting standards. See "The Onyx
Portfolio of Motor Vehicle Contracts -- Underwriting of Motor Vehicle
Contracts".
Onyx has limited historical experience with respect to prepayments
and is not aware of publicly available industry statistics that set forth
principal prepayment experience for retail installment sales contracts similar
to the Contracts. Onyx can make no prediction as to the actual prepayment rates
that will be experienced on the Contracts included in the Trust Property of any
Trust in either stable or changing interest rate environments. Securityholders
of each series will bear all reinvestment risk resulting from the rate of
prepayment of the Contracts included in the Trust Property of the related Trust.
POOL FACTOR AND POOL INFORMATION
The "Pool Factor" will be a six-digit decimal which the Servicer will
compute each month indicating the Pool Balance at the end of the month as a
fraction of the aggregate principal balance of the Contracts as of the Cut-Off
Date (the "ORIGINAL POOL BALANCE"). The Pool Factor will be 1.000000 as of the
Closing Date; thereafter, the Pool Factor will decline to reflect reductions in
the aggregate principal balance of the related Contracts (the "POOL BALANCE").
The amount of a Noteholder's or Certificateholder's pro rata share of the Pool
Balance for a given month can be determined by multiplying the original
denomination of such holder's Security by the Pool Factor for that month.
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, the related Securityholders will receive monthly reports
from the Trustee concerning payments received on the Contracts, the Pool
Balance, the Pool Factor, and various other items of information.
Securityholders of record during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. See
"Description of the Securities--Statements to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the
net proceeds to be received by the Seller from the sale of Securities of a given
series will be used to repay certain indebtedness incurred in connection with
its acquisition of the Contracts and to pay certain other expenses in connection
with the pooling of the Contracts and the issuance of such Securities.
THE SELLER
The Seller is a wholly-owned, limited purpose finance subsidiary of
Onyx which was incorporated under the laws of the State of Delaware on July 28,
1994 and has a limited operating history. The principal office of the Seller is
-15-
<PAGE> 87
located at 8001 Irvine Center Drive, 6th Floor, Irvine, CA 92618. The telephone
number of such office is (949) 450-5500.
The Seller was organized principally for the purpose of purchasing
retail installment sales contracts from Onyx in connection with its activities
as a finance subsidiary of Onyx. The Seller was organized for limited purposes,
and its certificate of incorporation limits its activities to purchasing Motor
Vehicle Contracts from Onyx and transferring such Motor Vehicle Contracts to
third parties and any activities incidental to and necessary or convenient for
the accomplishment of such purposes.
Onyx and the Seller have taken and will take steps in structuring the
transactions contemplated hereby that are intended to ensure that the voluntary
or involuntary application for relief by Onyx under any Insolvency Law will not
result in consolidation of the assets and liabilities of the Seller with those
of Onyx. These steps include the creation of the Seller as a separate, limited
purpose subsidiary pursuant to a certificate of incorporation containing certain
limitations (including restrictions on the nature of the Seller's business and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the unanimous affirmative vote of all of its
directors). However, there can be no assurance that the activities of the Seller
would not result in a court concluding that the assets and liabilities of the
Seller should be consolidated with those of Onyx in a proceeding under any
Insolvency Law.
The Seller has received the advice of counsel to the effect that,
subject to certain facts, assumptions and qualifications, it would not be a
proper exercise by a court of its equitable discretion to disregard the separate
corporate existence of the Seller and to require the consolidation of the assets
and liabilities of the Seller with the assets and liabilities of Onyx in the
event of the application of any Insolvency Law to Onyx. However, there can be no
assurance that a court would not conclude that the assets and liabilities of the
Seller should be consolidated with those of Onyx. If a court were to reach such
a conclusion, or a filing were made under any Insolvency Law by or against the
Seller, or if an attempt were made to litigate any of the foregoing issues,
delays in payments or distributions on any outstanding series of Securities
could occur or reductions in the amounts of such payments or distributions could
result.
Unless otherwise specified in the related Prospectus Supplement, the
Contracts included in the Trust Property of each Trust will have been sold by
Onyx and/or a Selling Subsidiary to the Seller pursuant to a purchase agreement
between Onyx or such Selling Subsidiary and the Seller (each, a "PURCHASE
AGREEMENT"). The Contracts included in the Trust Property of each Trust will be
sold by the Seller to such Trust pursuant to a Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable. Onyx, each Selling Subsidiary
and the Seller intend that each transfer of Contracts by Onyx or such Selling
Subsidiary to the Seller under the applicable Purchase Agreement or otherwise
will constitute a "true sale" of the Contracts to the Seller. If a transfer of
Contracts constitutes such a "true sale," such Contracts and the proceeds
thereof would not be part of the bankruptcy estate of Onyx or such Selling
Subsidiary under Section 541 of the United States Bankruptcy Code (the
"BANKRUPTCY CODE") should Onyx or such Selling Subsidiary become the subject of
a bankruptcy case subsequent to the transfer of such Contracts to the Seller.
The Seller has received the advice of counsel to the effect that,
subject to certain facts, assumptions and qualifications, in the event Onyx were
to become the subject of a voluntary or involuntary case under the Bankruptcy
Code subsequent to the transfer of Contracts to the Seller, the transfer of such
Contracts by Onyx to the Seller would be characterized as a "true sale" of the
Contracts from Onyx to the Seller and the Contracts and the proceeds thereof
would not form part of Onyx's bankruptcy estate pursuant to Section 541 of the
Bankruptcy Code.
THE SERVICER
The Contracts included in the Trust Property of each Trust initially
will be serviced by Onyx. Onyx was incorporated in California in 1993 and
reincorporated in Delaware in 1996 in connection with its initial public
offering of Common Stock, which was successfully completed in March 1996. Onyx
is engaged principally in the business of providing indirect automobile
financing to new car dealerships and selected used car dealerships in California
and in other states across the country. Onyx is headed by a management team with
extensive experience in the origination and
-16-
<PAGE> 88
servicing of indirect and direct automobile loans, and who, from 1985 to
present, have actively participated in a number of public securitizations of
Motor Vehicle Contracts. The Common Stock of Onyx is listed on the NASDAQ.
Onyx's principal executive offices are located at 8001 Irvine Center Drive, 5th
Floor, Irvine, California 92618.
Onyx acquires individual Motor Vehicle Contracts from Dealers, and to
a lesser extent subsidiaries of Onyx purchase such contracts from credit unions
or directly originate such contracts, after reviewing and approving the
customer's credit application in accordance with its underwriting policies and
procedures. See "The Contracts". Onyx, together with its subsidiaries, had
acquired or originated Motor Vehicle Contracts totaling approximately $1.4
billion from commencement of operations through March 31, 1998. As of March 31,
1998, Onyx had amassed a servicing portfolio of approximately $885 million. As
of March 31, 1998, approximately 79% of Onyx's servicing portfolio consisted of
motor vehicle installment contracts secured by used motor vehicles, and 21%
secured by new motor vehicles. As of March 31, 1998, Onyx had total assets of
approximately $182.1 million and stockholders' equity of $41.4 million.
Onyx finances acquisitions and originations of Motor Vehicle
Contracts on a short term basis through two separate warehouse facilities and
has previously financed acquisitions and originations of motor vehicle
installment contracts on a long term basis through sales of Motor Vehicle
Contracts to grantor trusts and periodically through whole loan sales.
DESCRIPTION OF THE SECURITIES
GENERAL
With respect to each Trust that issues Notes, one or more classes of
Notes of the related series will be issued pursuant to the terms of an
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. With respect to each Trust that
issues Certificates, one or more classes of Certificates of the related series
will be issued pursuant to the terms of a Trust Agreement or a Pooling and
Servicing Agreement, a form of each of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Notes, Certificates,
Indenture, Trust Agreement and Pooling and Servicing Agreement, as applicable,
and the related Prospectus Supplement.
The Securities of each series will be issued in the denominations
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, the Securities of each series will be issued
in book-entry form. See "--Book-Entry Registration" and "--Definitive
Securities". All Securities offered pursuant to this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more nationally recognized statistical rating agencies.
PRINCIPAL AND INTEREST ON THE SECURITIES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate or Pass-Through Rate, as applicable, and amount of or method of
determining payments or distributions of principal and interest on each class of
Securities of a given series will be described in the related Prospectus
Supplement. The right of holders of any class of Securities to receive payments
or distributions of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of Securities of such series, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Securities of such
series will be made prior to payments of principal thereon. To the extent
provided in the related Prospectus Supplement, a series may include one or more
classes of Strip Notes or Strip Certificates entitled to (i) principal payments
or distributions with disproportionate, nominal or no interest payments or
distributions or (ii) interest payments or distributions with disproportionate,
nominal or no principal payments or distributions. Each class of Securities may
have a different Interest Rate or Pass-Through Rate, as applicable, which may be
a fixed, variable or adjustable Interest Rate or Pass-Through Rate, as
applicable (and which may be zero for certain classes of Strip Notes or Strip
Certificates), or
-17-
<PAGE> 89
any combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate or Pass-Through Rate, as applicable,
for each class of Securities of a given series or the method for determining
such Interest Rate or Pass-Through Rate, as applicable. One or more classes of
Securities of a series may be redeemable in whole or in part under the
circumstances specified in the related Prospectus Supplement, including as a
result of the Servicer's exercising its option to purchase the remaining related
Contracts.
In the case of a series of Securities which includes two or more
classes of Securities, the sequential order and priority of payments or
distributions in respect of principal and interest, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
will be set forth in the related Prospectus Supplement. Payments or
distributions in respect of principal and interest of any class of Securities
will be made on a pro rata basis among all the Securityholders of such class.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each
class of Securities offered hereby will be represented by one or more
certificates registered in the name of Cede, as nominee of DTC. Unless otherwise
specified in the related Prospectus Supplement, Securityholders may hold
beneficial interests in Securities through DTC directly if they are participants
in DTC ("PARTICIPANTS") or indirectly through Participants.
Cede, as nominee for DTC, will hold the global Securities of each
series. Transfers between Participants will occur in the ordinary way in
accordance with DTC rules.
DTC is a limited purpose trust company organized under the laws of
the State of New York, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations which may include underwriters, agents or dealers with
respect to the Securities of any class or series. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "INDIRECT PARTICIPANTS").
Unless otherwise specified in the related Prospectus Supplement,
owners of beneficial interests in Securities that are in book-entry form
("SECURITY OWNERS") that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Securities may do so only through Participants and Indirect Participants. In
addition, Securityholders of a given series will receive all distributions of
principal and interest in respect of the Securities from the Indenture Trustee
or Trustee through the Participants who in turn will receive them from DTC.
Under a book-entry format, Security Owners of a given series may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Indenture Trustee or Trustee, as applicable, to Cede, as nominee of DTC. DTC
will forward such payments to its Participants which thereafter will forward
them to Indirect Participants or such Security Owners, it is anticipated that
the only "Securityholder" in respect of any series will be Cede, as nominee of
DTC. Security Owners of a given series will not be recognized as Securityholders
of such Series, and such Security Owners will be permitted to exercise the
rights of Securityholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting
DTC and its operations (the "DTC RULES"), DTC is required to make book-entry
transfers of Securities of a given series among Participants on whose behalf it
acts with respect to such Securities and is required to receive and transmit
distributions of principal of, and interest on, such Securities. Participants
and Indirect Participants with which Security Owners of a given series have
accounts with respect to the Securities of such series similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Security Owners of such series. Accordingly, although Security
Owners will not possess Securities, Security Owners will receive payments and
will be able to transfer their interests.
-18-
<PAGE> 90
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a Security
Owner of a given series to pledge Securities of such series to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such Securities, may be limited due to the lack of a physical
certificate for such Securities.
DTC will advise the Trustee in respect of each Series that it will
take any action permitted to be taken by a Securityholder of such series only at
the direction of one or more Participants to whose account with DTC the
Securities of such series are credited. Additionally, DTC has advised the Seller
that it will take such actions with respect to specified percentages of the
Securityholder's interest only at the direction of and on behalf of Participants
whose holdings include undivided interests that satisfy such percentages. DTC
may take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of Securities among participants of DTC, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the
Securities of a given series will be issued in fully registered, certificated
form ("DEFINITIVE SECURITIES") to Security Owners or their nominees rather than
to DTC or its nominee, only if (i) the Seller, the related Trustee or the
Administrator, as applicable, advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depositary
with respect to the Certificates, and the Seller, the related Trustee or the
Administrator are unable to locate a qualified successor, or (ii) after the
occurrence of an Indenture Event of Default under the related Indenture, if
applicable, or an Event of Default under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, Security Owners
representing in the aggregate more than 50% of the outstanding principal balance
of such Securities advise the applicable Trustee through Participants in writing
that the continuation of a book-entry system with respect to the Securities
through depositary is no longer in the best interest of the Security Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable Trustee and/or the related Indenture Trustee
will be required to notify all Security Owners, through Participants, of the
availability through DTC of Definitive Securities. Upon surrender by DTC of the
definitive Securities representing the Securities and instructions for
re-registration, the applicable Trustee and, if applicable, the related
Indenture Trustee will reissue the Securities as Definitive Securities, and
thereafter the applicable Trustee will recognize the holders of such Definitive
Securities as Securityholders (collectively, "HOLDERS").
Payments or distributions of principal of and interest on the
Securities will be made by the Paying Agent directly to Holders of Definitive
Securities in accordance with the procedures set forth herein and in the related
Indenture or the related Trust Agreement or Pooling and Servicing Agreement, as
applicable. Such payments or distributions on each Distribution Date and on the
final Distribution Date (as specified in the related Prospectus Supplement) will
be made to Holders in whose names the Definitive Securities were registered at
the close of business on the related Record Date. Payments or distributions will
be made by check mailed to the address of such Holder as it appears on the
register maintained by the applicable Trustee or Indenture Trustee. The final
payment or distribution on any Security (whether Definitive Securities or the
Security registered in the name of DTC's nominee), however, will be made only
upon presentation and surrender of such Security at the office or agency
specified in the notice of final payment or distribution to Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the applicable Trustee or Indenture Trustee, or at the offices of a
transfer agent or registrar named in a notice delivered to holders of such
Definitive Securities, which shall initially be the applicable Trustee or
Indenture Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the applicable Trustee, Indenture Trustee, transfer
agent or registrar may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
-19-
<PAGE> 91
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, upon written request of the Servicer, the
related Indenture Trustee will provide to the Servicer within 15 days after
receipt of such request a list of the names and addresses of all Noteholders of
record as of the most recent Record Date. Upon written request by three or more
holders of the Notes of such series or by Holders of such Notes evidencing not
less than 25% of the aggregate outstanding principal balance of such Notes, the
Indenture Trustee will afford such Noteholders access during business hours to
the current list of Noteholders for purposes of communicating with other
Noteholders with respect to their rights under the Indenture or under such
Notes.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series upon written request of the Servicer,
the related Trustee will provide to the Servicer within 15 days after receipt of
such request a list of the names and addresses of all Certificateholders of
record as of the most recent Record Date. Upon written request by three or more
holders of the Certificates of such series or by Holders of such Certificates
evidencing not less than 25% of the aggregate outstanding principal balance of
such Certificates, the related Trustee will afford such Certificateholders
access during business hours to the current list of Certificateholders for
purposes of communicating with other Certificateholders with respect to their
rights under the related Trust Agreement or Pooling and Servicing Agreement or
under such Certificates.
The Pooling and Servicing Agreement, Trust Agreement and Indenture
will not provide for the holding of annual or other meetings of Securityholders.
STATEMENTS TO SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, on each Distribution Date, the applicable
Trustee or Indenture Trustee will include with each payment or distribution to
each Securityholder a Distribution Date Statement setting forth for such
Distribution Date the following information (and any other information so
specified in the related Prospectus Supplement):
(i) the amount of the distribution on or with respect to
each class of such Securities allocable to principal;
(ii) the amount of the distribution on or with respect to
each class of such Securities allocable to interest;
(iii) the aggregate distribution amount for such Distribution
Date;
(iv) the premiums payable to the related Security Insurer, if
any, the balance of any fund or account with respect to
any credit or liquidity enhancement on such date, after
giving effect to changes thereto on such date and the
amount to be deposited in the spread account, if any;
(v) the aggregate Servicing Fee paid to the Servicer with
respect to the related Contracts for the related
Collection Period;
(vi) the number of, and aggregate amount of monthly principal
and interest payments due on, the related Contracts
which are delinquent as of the end of the related
collection period (as defined in the related Prospectus
Supplement, the "COLLECTION PERIOD") presented on a
30-day, 60-day and 90-day basis;
(vii) the amount available in the Collection Account for
payment of the aggregate amount payable or distributable
on such Securities, the amount of the Servicing Fee, the
amount of any principal or interest shortfall with
respect to each class of Securities and the amount
required from any applicable Security Insurer pursuant
to the related Security Insurance Policy to pay any
shortfall;
-20-
<PAGE> 92
(viii) the aggregate amount of proceeds received by the
Servicer, net of recoverable out-of-pocket expenses,
received for a Contract which is a "DEFAULTED CONTRACT"
(as such term is defined in the related Prospectus
Supplement).
(ix) the net credit losses for the Collection Period;
(x) the number and net outstanding balance of Contracts for
which the Financed Vehicle has been repossessed;
(xi) the Pool Balance; and
(xii) the amount in the Collection Account available for such
Distribution Date.
Within a reasonable period of time after the end of each calendar
year during the term of each Trust, but not later than the latest date permitted
by law, the applicable Trustee or Indenture Trustee and the Paying Agent shall
furnish to each person who on any Record Date during such calendar year shall
have been a registered Securityholder a statement containing certain information
for the purposes of such Securityholder's preparation of federal income tax
returns. See "Certain Federal Income Tax Consequences".
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a Trust
will purchase Contracts from the Seller and the Servicer will agree to service
such Contracts, each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and each Administration Agreement pursuant to which
Onyx will undertake certain administrative duties with respect to a Trust that
issues Notes (collectively, the "TRANSFER AND SERVICING AGREEMENTS"). Forms of
the Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of each applicable Transfer and Servicing
Agreement and the related Prospectus Supplement.
SALE AND ASSIGNMENT OF THE CONTRACTS
At the time of issuance of a series of Securities, the Seller will
sell and assign to the applicable Trustee, without recourse, pursuant to a Sale
and Servicing Agreement or a Pooling and Servicing Agreement, as applicable, the
Seller's entire interest in the Contracts and the proceeds thereof, including
its security interests in the related Financed Vehicles. Each Contract will be
identified in a schedule appearing as an exhibit to such Sale and Servicing
Agreement or Pooling and Servicing Agreement. The applicable Trustee will,
concurrently with such sale and assignment, execute, authenticate and deliver
the definitive certificates representing the related Securities. Unless
otherwise provided in the related Prospectus Supplement, the net proceeds
received from the sale of the Securities of a given series will be applied to
the purchase of the related Contracts from the Seller and, to the extent
specified in the related Prospectus Supplement, to make the required initial
deposit into any reserve fund, spread account or with respect to any other
credit or liquidity enhancement. Unless otherwise specified in the related
Prospectus Supplement, pursuant to the applicable Purchase Agreement, prior to
sale of the Contracts to the Trustee and the issuance of the Securities, Onyx
and each Selling Subsidiary will sell and assign to the Seller Onyx's and such
Selling Subsidiaries' entire interest in the Contracts.
Pursuant to each Sale and Servicing Agreement or Pooling and
Servicing Agreement, the Seller will represent to the applicable Trustee and the
Trust for the benefit of holders of the Securities and any applicable Security
Insurer that: (i) each Contract to be included in the Trust Property of such
Trust contains customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against the
collateral of the benefits of the security; (ii) each such Contract and the sale
of the related Financed Vehicle complied at the time it was made in all material
respects with all requirements of applicable federal, state, and local laws, and
regulations
-21-
<PAGE> 93
thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Federal Trade
Commission Act, the Fair Debt Collection Practices Act, the Fair Credit Billing
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and any other
consumer credit, equal opportunity and disclosure laws applicable to such
Contract and sale; (iii) each such Contract constitutes the legal, valid, and
binding payment obligation in writing of the obligor, enforceable by the holder
thereof in all respects in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization, liquidation
and other similar laws and equitable principles relating to or affecting the
enforcement of creditors' rights; (iv) as of the Closing Date, each such
Contract was secured by a validly perfected first priority security interest in
the Financed Vehicle in favor of the Seller as secured party or all necessary
action with respect to such Contract has been taken to perfect a first priority
security interest in the related Financed Vehicle in favor of the Seller as
secured party, which security interest is assignable and has been so assigned by
the Seller to the Trust; (v) as of the Closing Date, the Seller had good and
marketable title to and was the sole owner of each such Contract, free of liens,
claims, encumbrances and rights of others; (vi) as of the Closing Date, there
are no rights of rescission, offset, counterclaim, or defense, and the Seller
has no knowledge of the same being asserted or threatened, with respect to any
such Contract; (vii) as of the Closing Date, the Seller had no knowledge of any
liens or claims that have been filed, including liens for work, labor, materials
or unpaid taxes relating to a Financed Vehicle, that would be liens prior to, or
equal or coordinate with, the lien granted by such Contract; (viii) except for
payment defaults continuing for a period of not more than 30 days as of the
Cut-Off Date, the Seller has no knowledge that a default, breach, violation, or
event permitting acceleration under the terms of any such Contract exists, and
the Seller has no knowledge that a continuing condition that with notice or
lapse of time would constitute a default, breach, violation or event permitting
acceleration under the terms of any such Contract exists, and the Seller has not
waived any of the foregoing; (ix) each such Contract requires that the obligor
thereunder obtain comprehensive and collision insurance covering the Financed
Vehicle; (x) each such Contract was acquired from a dealer with whom Onyx
ordinarily does business (except for Contracts purchased or originated by a
subsidiary of Onyx); (xi) no adverse selection procedures were utilized in
selecting such Contracts; (xii) scheduled payments under each such Contract have
been applied in accordance with the method for allocating principal and interest
set forth in such Contract (either the Rule of 78's or the Simple Interest
Method); and (xiii) there is only one original of each such Contract and such
original is being held by the applicable Trustee as custodian on behalf of the
Trust and any applicable Security Insurer. As of the last day of the Collection
Period following the Collection Period (or, if the Seller elects, the last day
of such Collection Period) during which the Seller becomes aware or receives
written notice from the applicable Trustee or the Servicer that a Contract does
not meet any of the criteria in the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and such failure materially and adversely
affects the interests of the Securityholders or any applicable Security Insurer
in a Contract, the Seller, unless it cures the failed criterion, will repurchase
the Contract from the applicable Trustee at the price specified in the related
Prospectus Supplement and, if applicable, all amounts due to any applicable
Security Insurer (the "REPURCHASE AMOUNT"). The repurchase obligation will
constitute the sole remedy available to the Securityholders or the applicable
Trustee for the failure of a Contract to meet any of the criteria set forth in
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
THE COLLECTION ACCOUNT AND ELIGIBLE INVESTMENTS
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Trust, the Servicer will establish and maintain an account (the
"COLLECTION ACCOUNT") in the name of the related Trustee (or, in the case of a
series of Securities that includes Notes, with the related Indenture Trustee),
into which all collections made on the related Contracts will be deposited.
Funds in the Collection Account will be invested in Eligible Investments by the
applicable Trustee or Indenture Trustee, acting at the direction of any
applicable Security Insurer. "ELIGIBLE INVESTMENTS" are generally limited to
investments acceptable to each Rating Agency rating the applicable Securities as
being consistent with the rating of such Securities. Except as otherwise
described in the related Prospectus Supplement, Eligible Investments made with
respect to the Collection Account will mature no later than the next following
Distribution Date and income from amounts on deposit in the Collection Account
which are invested in Eligible Investments will be paid to the Servicer monthly
unless earlier directed by the Servicer.
-22-
<PAGE> 94
PAYAHEAD ACCOUNT
Unless otherwise provided in the related Prospectus Supplement,
payments made by an obligor in excess of the Monthly P&I due on the current Due
Date and any other amount currently due on a Rule of 78's Contract (other than
Full Prepayments) ("PAYAHEADS") will be initially deposited in the Collection
Account and subsequently transferred from the Collection Account, as of a
specified periodic date set forth in the related Prospectus Supplement (the
"SERVICER REPORT DATE") (as defined with respect to each series of Securities in
the related Prospectus Supplement), to an account established in the name of the
related Trustee or Indenture Trustee for the benefit of the obligors and the
Securityholders as their interests may appear (the "PAYAHEAD ACCOUNT") and shall
be held in such account until distributed in accordance with the original
schedule of payments for the related Contract or until the amount of such
partial prepayment equals the amount the obligor would be required to pay in
order to prepay the Contract in full. Unless otherwise provided in the related
Prospectus Supplement, amounts on deposit in the Payahead Account will be
invested in Eligible Investments with maturity dates such that on each
Distribution Date Monthly P&I for each Rule of 78's Contract with respect to
which a partial prepayment had been made will be available to be paid or
distributed to Securityholders. Unless otherwise specified in the related
Prospectus Supplement, the Payahead Account will not be part of the applicable
Trust and the related Trustee and, if applicable, the related Indenture Trustee
will not have a security interest in the Payahead Account. Unless otherwise
provided in the related Prospectus Supplement, earnings on Eligible Investments
credited to the Payahead Account will be paid to the Servicer.
OTHER ACCOUNTS
Any other accounts to be established with respect to a Trust,
including any reserve fund, will be described in the related Prospectus
Supplement (together with the Collection Account and the Payahead Account, the
"TRUST ACCOUNTS"). For any series of Securities, funds in any related reserve
fund and such other Trust Account as may be identified in the related Prospectus
Supplement will be invested as provided in the related Sale and Servicing
Agreement, Pooling and Servicing Agreement or Indenture in Eligible Investments.
PAYMENTS ON CONTRACTS
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, all collections on the Contracts will be deposited in or
credited to the Collection Account within two Business Days of the receipt by
the Servicer of payments from obligors. Unless otherwise specified in the
related Prospectus Supplement, such collections will include: Full Prepayments
and partial prepayments (pending transfer of Payaheads on Rule of 78's Contracts
to any Payahead Account), Net Liquidation Proceeds and Net Insurance Proceeds,
any amounts deposited by Onyx or the Seller in the Collection Account to
purchase Contracts because of certain material defects in documents related to
the Contracts or certain breaches in representations or warranties regarding the
Contracts made by Onyx or the Seller in the Agreement that materially and
adversely affect the interests of the Securityholders or any applicable Security
Insurer, any amounts deposited by the Servicer in the Collection Account to
purchase Contracts as to which the Servicer has breached certain servicing
covenants, and any amounts deposited by the Servicer in the Collection Account
as a result of such entity exercising its right under certain circumstances to
purchase all or a portion of the Contracts. "NET LIQUIDATION PROCEEDS" are
proceeds received by the Servicer (net of Liquidation Expenses) upon liquidation
of any Defaulted Contract. "LIQUIDATION EXPENSES" are the reasonable
out-of-pocket expenses (exclusive of overhead expenses) incurred by the Servicer
in realizing upon a Defaulted Contract which are not recoverable under any
insurance policy. "NET INSURANCE PROCEEDS" are proceeds paid by any insurer
under a comprehensive and collision or vendor's single interest insurance policy
related to a Contract (other than funds used for the repair of the related
Financed Vehicle or otherwise released to the related obligor in accordance with
normal servicing procedures), after reimbursement to the Servicer of expenses
recoverable under such policy. Partial prepayments of Rule of 78's Contracts are
initially deposited in the Collection Account and are transferred to the
Payahead Account, if any, on the Servicer Report Date.
-23-
<PAGE> 95
PAYMENTS AND DISTRIBUTIONS
With respect to each series of Securities, beginning on the
Distribution Date specified in the related Prospectus Supplement, payments and
distributions of principal and interest (or, where applicable, of principal or
interest only) on each class of such Securities entitled thereto will be made by
the applicable Indenture Trustee to the Noteholders and by the applicable
Trustee to the Certificateholders of such series. The timing, calculation,
allocation, order, source, priorities of and requirements for all payments and
distributions to each class of Securities of such series will be set forth in
the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date collections on
the related Contracts will be withdrawn from the related Collection Account and
will be paid and distributed to the Noteholders and/or Certificateholders as
provided in the related Prospectus Supplement. Credit enhancement will be
available to cover any shortfalls in the amount available for payment or
distribution to the Securityholders on such date to the extent specified in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, payments or distributions in respect of one or more classes of
Securities of the applicable series may be subordinate to payments or
distributions in respect of one or more other classes of Securities of such
series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement
arrangements and the provider thereof, if applicable, with respect to each class
of Securities of a given series, if any, will be set forth in the related
Prospectus Supplement. If and to the extent provided in the related Prospectus
Supplement, credit and cash flow enhancement may be in the form of subordination
of one or more classes of Securities, one or more Security Insurance Policies,
reserve funds, over-collateralization, letters of credit, credit or liquidity
facilities, guaranteed investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, yield supplement agreements,
other agreements with respect to third party payments or other support, cash
deposits or such other arrangements as may be described in the related
Prospectus Supplement or any combination of two or more of the foregoing. If
specified in the applicable Prospectus Supplement, credit or cash flow
enhancement for a class of Securities may cover one or more other classes of
Securities of the same series, and credit or cash flow enhancement for a series
of Securities may cover one or more other series of Securities.
The presence of credit enhancement for the benefit of any class or
series of Securities is intended to enhance the likelihood of receipt by the
Securityholders of such class or series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Securityholders
will experience losses. Unless otherwise specified in the related Prospectus
Supplement, the credit enhancement for a class or series of Securities will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any credit enhancement or which are not covered by any
credit enhancement,
Securityholders of any class or series will bear their allocable share of
deficiencies, as described in the related Prospectus Supplement. In addition, if
a form of credit enhancement covers more than one class or series of Securities,
Securityholders of any such series will be subject to the risk that such credit
enhancement will be exhausted by the claims of Securityholders of other classes
or series.
INSURANCE ON FINANCED VEHICLES
Each obligor on a Contract will be required to maintain insurance
covering physical damage to the Financed Vehicle of such obligor in an amount
not less than the lesser of its maximum insurable value or the unpaid principal
balance under such Contract. Onyx or the applicable Onyx subsidiary will be
required to be named as a loss payee under the policy of insurance obtained by
the obligor. Each Financed Vehicle will be required to be insured against loss
and damage due to fire, theft, transportation, collision and other risks covered
by comprehensive coverage. Onyx also maintains a vendor's single interest
insurance policy, as to which the Seller has been named as an additional
insured, which policy, unless otherwise specified in the related Prospectus
Supplement, will provide coverage upon repossession of a Financed Vehicle in an
amount equal to the lesser of the actual cash value of such Financed Vehicle,
the cost of repair or replacement for such Financed Vehicle and the unpaid
balance of the related Contract. Since obligors may choose their own insurers to
provide the required coverage, the specific terms and conditions of their
policies vary.
-24-
<PAGE> 96
SERVICER REPORTS TO THE TRUSTEES AND SECURITY INSURER
The Servicer will perform certain monitoring and reporting functions
for the applicable Indenture Trustee, if any, the applicable Trustee, and any
applicable Security Insurer, including the preparation and delivery on the
Servicer Report Date of a statement (the "DISTRIBUTION DATE STATEMENT") setting
forth the amounts on deposit in the Collection Account, the sources of such
amounts and the amounts to be paid to Securityholders. The Distribution Date
Statement shall also include information regarding Contracts purchased by the
Servicer or repurchased by the Seller.
REPURCHASE OF CONTRACTS
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer will have the option to purchase the remaining
Contracts included in the Trust Property of a Trust on any Distribution Date as
of which the related Pool Balance (after giving effect to the principal payments
and distributions otherwise to be made on such Distribution Date) has declined
to the percentage of the Original Pool Balance specified in the related
Prospectus Supplement. Any such purchase must be effected at the price specified
in the related Prospectus Supplement, if applicable, plus all amounts due to any
applicable Security Insurer. In addition, Onyx or the Seller will be required to
purchase or repurchase, respectively, Contracts under certain circumstances if
certain representations and warranties made by Onyx or the Seller respectively
are incorrect in any manner that materially and adversely affects the interest
of the Securityholders. Additionally, the Servicer will be required to purchase
Contracts as to which the Servicer has breached certain servicing covenants.
SERVICING FEE
The Servicer will be entitled to compensation for the performance of
its obligations under each Sale and Servicing Agreement and Pooling and
Servicing Agreement. Unless otherwise specified in the related Prospectus
Supplement, the Servicer shall be entitled to receive on each Distribution Date
an amount (the "SERVICING FEE") equal to the product of a specified percentage
per annum (as set forth in the related Prospectus Supplement, the "SERVICING FEE
RATE") multiplied by the Pool Balance as of the end of the Collection Period
preceding the related Collection Period. Unless otherwise specified in the
related Prospectus Supplement, the Servicer or its designee shall be entitled to
retain, as additional compensation, all late payment charges, extension fees and
similar items paid in respect of the Contracts. The Servicer or its designee may
also be entitled to receive as servicing compensation reinvestment earnings on
Eligible Investments and the amount, if any, by which the outstanding principal
balance based on the Rule of 78's of a Contract that is subject to a Full
Prepayment exceeds the Scheduled Balance of such Contract. Unless otherwise
specified in the related Prospectus Supplement, the Servicer shall pay all
expenses incurred by it in connection with its servicing activities under the
Agreement and shall not be entitled to reimbursement of such expenses except to
the extent they constitute Liquidation Expenses or expenses recoverable under an
applicable insurance policy.
WAIVERS AND EXTENSIONS
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will require the Servicer to use its best efforts to collect all payments called
for under the terms and provisions of the related Contracts. Unless otherwise
specified in the related Prospectus Supplement, and subject to any limitations
set forth therein, the Servicer, consistent with the foregoing, will be
permitted, in its discretion, to (i) waive any late payment charges in
connection with delinquent payments on a Contract, (ii) waive prepayment charges
and (iii) grant up to three extensions of thirty (30) days or less in order to
work out a default or an impending default.
REALIZATION UPON DEFAULTED CONTRACTS
The Servicer will liquidate any Contract that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. Such liquidation may be through
repossession or sale
-25-
<PAGE> 97
of the Financed Vehicle securing such Contract or otherwise. In connection with
such repossession or other conversion, the Servicer will follow such procedures
as are normal and usual for holders of motor vehicle retail installment sales
contracts. In this regard, the Servicer may sell the Financed Vehicle at a
repossession or other sale.
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trustee or Indenture Trustee, as applicable, and, if applicable, the
related Security Insurer, on or before each March 15 after the end of each
fiscal year of the Servicer, a statement as to compliance by the Servicer during
the preceding fiscal year with certain standards relating to the servicing of
the applicable Contracts.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trustee or Indenture Trustee, as
applicable, and, if applicable, the related Security Insurer, on each March 15
after the end of each fiscal year of the Servicer, of a certificate signed by an
authorized officer of the Servicer stating that the Servicer has fulfilled its
obligations under the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, throughout the preceding fiscal year or, if there has
been a default in the fulfillment of any such obligation, describing each such
default.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Trustee or
Indenture Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer may not resign from its obligations and duties as
Servicer thereunder except upon determination that the Servicer's performance of
such duties is no longer permissible under applicable law. No such resignation
will become effective until the related Trustee or Indenture Trustee, as
applicable, or a successor servicer, has assumed the Servicer's servicing
obligations and duties under the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable. See "-- The Trustee and Indenture Trustee".
Each Sale and Servicing Agreement and Pooling and Servicing
Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees, and agents shall be under any liability to the
related Trust or the related Securityholders for taking any action or for
refraining from taking any action pursuant to the Sale and Servicing Agreement
or Pooling and Servicing Agreement, as applicable, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence (except errors in judgment) in the
performance of duties or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, will provide that the Servicer is under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to the Servicer's servicing responsibilities under the Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, and that,
in its opinion, may cause it to incur any expense or liability.
The Servicer may, however, undertake any reasonable action that it may deem
necessary or desirable in respect of the Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, and the rights and duties of the parties
thereto and the interests of the Securityholders thereunder. In such event, the
legal expenses and costs of such action and any liability resulting therefrom
will be expenses, costs and liabilities of the related Trust, and the Servicer
will be entitled to be reimbursed therefor out of the Collection Account. Any
such indemnification or reimbursement could reduce the amount otherwise
available for distribution to Securityholders.
Any corporation into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer is a party or any corporation succeeding to
the business of the Servicer, or, with respect to the Servicer's obligation as
the Servicer, will be the successor of the Servicer under the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
-26-
<PAGE> 98
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"SERVICER DEFAULT" under the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, will consist of: (i) any failure by the
Servicer to deposit in or credit to the Collection Account or the Payahead
Account, if any, any amount required to be so deposited or credited, which
failure continues unremedied for three Business Days after written notice from
the applicable Trustee or Indenture Trustee, or, if applicable, the related
Security Insurer, is received by the Servicer or discovery by the Servicer; (ii)
any failure by the Servicer to deliver to such Trustee or Indenture Trustee, or,
if applicable, the related Security Insurer, certain reports required by such
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable,
by the Servicer Report Date or to perform certain other covenants under such
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable;
(iii) any failure by the Servicer or the Seller duly to observe or perform in
any material respect any other covenants or agreements of the Servicer or the
Seller in such Sale and Servicing Agreement or Pooling and Servicing Agreement,
which failure materially and adversely affects the rights of Securityholders or
the applicable Trustee or Indenture Trustee, or, if applicable, the related
Security Insurer, and which continues unremedied for 30 days after the giving of
written notice of such failure (A) to the Servicer or the Seller as the case may
be, by the applicable Trustee or Indenture Trustee, or, if applicable, the
related Security Insurer, or (B) to the Servicer or the Seller, as the case may
be, and to the applicable Trustee or Indenture Trustee by Holders of Securities
evidencing not less than 25% in principal amount of such Securities, acting
together as a single class, or, if applicable, the related Security Insurer;
(iv) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities, or similar proceedings and certain actions by the Servicer or
Seller indicating its insolvency, reorganization pursuant to bankruptcy or
similar proceedings or inability to pay its obligations; (v) any breach of any
of the representations and warranties of the Servicer or the Seller (except for
any breaches relating to Contracts repurchased by the Seller or the Servicer)
which breach has a material adverse effect on the related Trust and which
continues for 30 days after the giving of notice of such breach to the Seller or
the Servicer, as the case may be, by the applicable Trustee or Indenture Trustee
or the Holders of Securities evidencing not less than 25% in principal amount of
such Securities, acting together as a single class, or, if applicable, the
related Security Insurer; (vi) any change in control of the Servicer in
violation of the covenants set forth in such Sale and Servicing Agreement or
Pooling and Servicing Agreement; and (vii) if applicable, the determination by
the Security Insurer that the quality of performance of the Servicer is not in
compliance with either the terms of the Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, or that the Servicer's performance is
not adequate, as measured in accordance with industry standards, in respect of
all Motor Vehicle Contracts serviced by the Servicer.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided in the
related Prospectus Supplement, as long as a Servicer Default under a Sale and
Servicing Agreement remains unremedied, the related Indenture Trustee, the
related Security Insurer, if any, or holders of Notes of the related series
evidencing not less than 25% of principal amount of such Notes then outstanding,
acting together as a single class, may terminate all the rights and obligations
of the Servicer under such Sale and Servicing Agreement, whereupon such
Indenture Trustee or a successor servicer appointed by such Indenture Trustee
will succeed to all the responsibilities, duties and liabilities of the Servicer
under such Sale and Servicing Agreement and will be entitled to similar
compensation arrangements; provided, however, that such Indenture Trustee will
not be obligated to purchase Contracts if certain representations and warranties
of Onyx as Servicer prove incorrect or if certain covenants of Onyx as Servicer
are breached. In the case of any Trust that has not issued Notes, unless
otherwise provided in the related Prospectus Supplement, as long as a Servicer
Default under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement remains unremedied, the related Trustee, the related Security Insurer,
if any, or holders of Certificates of the related series evidencing not less
than 25% of the principal amount of such Certificates then outstanding, acting
together as a single class, may terminate all the rights and obligations of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement, whereupon such Trustee or a successor servicer appointed by such
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements; provided,
however, that such Trustee will not be obligated to purchase Contracts if
certain representations and warranties of Onyx as Servicer prove incorrect or if
certain covenants of Onyx as Servicer are breached. In the event that such
Indenture Trustee or Trustee is unwilling or unable to so act, it may appoint,
or petition a court of competent jurisdiction for the appointment of, a
successor with a net worth of at least $50,000,000 and whose regular business
includes the servicing of automobile and/or light duty truck receivables.
-27-
<PAGE> 99
With respect to each Trust that has issued Notes, unless otherwise
provided in the related Prospectus Supplement, the holders of Notes of the
related series evidencing not less than 51% of the principal amount of such
Notes then outstanding, acting together as a single class, with the consent of
the related Security Insurer, if any, may, on behalf of all Securityholders of
the related series, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement and its consequences,
except a Servicer Default in making any required deposits to or payments from
any of the Trust Accounts in accordance with such Sale and Servicing Agreement.
With respect to each Trust that has not issued Notes, holders of Certificates of
the related series evidencing not less than 51% of the principal amount of such
Certificates then outstanding, acting together as a single class, with the
consent of the related Security Insurer, if any, may, on behalf of all such
Certificateholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, except a Servicer Default in making any required deposits
to or payments from the related Trust Accounts in accordance with such Sale and
Servicing Agreement or Pooling and Servicing Agreement. No such waiver will
impair such Noteholders' or Certificateholders' rights with respect to
subsequent defaults.
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, the applicable Trustee or Indenture Trustee will be under
no obligation to exercise any of the trusts or powers vested in it by the Sale
and Servicing Agreement or Pooling and Servicing Agreement, as applicable, or to
make any investigation of matters arising thereunder or to institute, conduct,
or defend any litigation thereunder or in relation thereto at the request,
order, or direction of any of the Securityholders, unless such Securityholders
have offered to such Trustee or Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. Unless otherwise specified in the related Prospectus
Supplement, no Securityholder will have any right under the Sale and Servicing
Agreement or the Pooling and Servicing Agreement to institute any proceeding
with respect thereto, unless such Holder previously has given to such Trustee or
Indenture Trustee, as applicable, written notice of default and unless (i) in
the case of a Trust that has issued Notes, holders of Notes of the related
Series evidencing not less than 25% of the principal amount of such Notes then
outstanding, or (ii) in the case of a Trust that has not issued Notes, holders
of Certificates of the related series evidencing not less than 25% of the
principal amount of such Certificates then outstanding, in either case with the
consent of the related Security Insurer, if any, have made written request upon
such Trustee or Indenture Trustee to institute such proceeding in its own name
as Trustee or Indenture Trustee thereunder and have offered to such Trustee or
Indenture Trustee reasonable indemnity and such Trustee or Indenture Trustee for
30 days has neglected or refused to institute any such proceedings.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each
of the Transfer and Servicing Agreements may be amended by the parties thereto,
without the consent of the related Securityholders, but with the consent of the
related Security Insurer, if any, to cure any ambiguity, correct or supplement
an provision therein which may be inconsistent with any other provision therein,
or make any other provisions with respect to matters or questions arising
thereunder which are not inconsistent with the provisions of such Transfer and
Servicing Agreement; provided that such action will not materially and adversely
affect the interest of any such Securityholder. Any amendment shall not be
deemed to materially and adversely affect the interest of any Securityholder if
the person requesting the amendment obtains a letter from each Rating Agency to
the effect that the amendment would not result in a downgrading or withdrawal of
the ratings then assigned to the applicable Securities by such Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, the Transfer
and Servicing Agreements may also be amended by the Seller, the Servicer, the
related Trustee and any related Indenture Trustee with the consent of (i) in the
case of a Trust that has issued Notes, the holders of Notes of the related
series evidencing not less than 51% of the principal amount of such Notes then
outstanding, acting together as a single class, or (ii) in the case of a Trust
that has not issued Notes, the holders of Certificates of the related series
evidencing not less than 51% of the principal amount of such Certificates then
outstanding, acting together as a single class, and in either case with the
consent of the related Security Insurer, if any, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Transfer and Servicing Agreements or of modifying in any manner the rights
of such Noteholders or
-28-
<PAGE> 100
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Contracts or distributions that are
required to be made for the benefit of such Noteholders or Certificateholders or
(ii) reduce the aforesaid percentage of the Notes or Certificates of such series
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates, as the case may be, of
such series.
TERMINATION
With respect to each Trust, except as otherwise set forth in the
related Prospectus Supplement, the obligations of the Seller, the Servicer, the
related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Contract and the disposition
of any amounts received upon liquidation of any remaining Contracts that are
part of the related Trust Property and (ii) (a) the payment to Noteholders, if
any, and Certificateholders of the related series of all amounts required to be
paid to them pursuant to the Transfer and Servicing Agreements and the
disposition of all property held as part of the related Trust, (b) if
applicable, the termination of the related Security Insurance Policy in
accordance with its terms and the surrender of such policy to the related
Security Insurer for cancellation, (c) the payment of all amounts owed to such
Trustee or Indenture Trustee under the Transfer and Servicing Agreements and (d)
if applicable, the payment of all amounts owed to the related Security Insurer
in connection with the related Security Insurance Policy. Unless otherwise
specified in the related Prospectus Supplement, in order to avoid excessive
administrative expense, the Servicer will be permitted at its option to purchase
the remaining Contracts included in the Trust Property of a Trust on any
Distribution Date as of which the related Pool Balance (after giving effect to
the principal payments and distributions otherwise to be made on such
Distribution Date) has declined to the percentage of the Original Pool Balance
specified in the related Prospectus Supplement at the price specified in the
related Prospectus Supplement and, if applicable, all amounts due to the related
Security Insurer in connection with the related Security Insurance Policy. The
applicable Trustee or Indenture Trustee will give written notice of termination
to each Securityholder of record. The final payment or distribution to any
Securityholder will be made only upon surrender and cancellation of such
Securityholder's Security at an office or agency of the applicable Trustee or
Indenture Trustee specified in the notice of termination. Any funds remaining in
the applicable Trust, after the applicable Trustee or Indenture Trustee has
taken certain measures to locate a Securityholder and such measures have failed,
will be distributed to a charity designated by the Servicer.
THE TRUSTEE AND INDENTURE TRUSTEE
With respect to each Trust, the applicable Trustee or Indenture
Trustee will not make any representations as to the validity or sufficiency of
the related Transfer and Servicing Agreements, the related Indenture, if any,
the Securities, or any related Contracts or related documents, or the investment
of any monies by the Servicer before such monies are deposited in or credited to
the related Collection Account. At the applicable Closing Date, such Trustee or
Indenture Trustee will not have examined the Contracts. If no Event of Default
has occurred, such Trustee or Indenture Trustee will be required to perform only
those duties specifically required of it under the related Transfer and
Servicing Agreements or the related Indenture, if applicable. Generally, those
duties are limited to the receipt of the various certificates, reports or other
instruments required to be furnished to such Trustee or Indenture Trustee under
the related Transfer and Servicing Agreements or the related Indenture, if
applicable, the making of payments or distributions to Securityholders in the
amounts specified in certificates provided by the Servicer and, if applicable,
drawing on the related Security Insurance Policy if required to make payments or
distributions to Securityholders.
Each Trustee and Indenture Trustee, and any of its affiliates, may
hold Securities in their own names. In addition, for the purpose of meeting the
legal requirements of certain local jurisdictions, each Trustee and Indenture
Trustee (in certain circumstances, acting jointly with the Servicer) shall have
the power to appoint co-trustees or separate trustees of all or any part of the
related Trust Property. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon such Trustee or Indenture
Trustee by the related Transfer and Servicing Agreement or Indenture, as
applicable, shall be conferred or imposed upon such Trustee or Indenture Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which such Trustee or Indenture Trustee shall be
-29-
<PAGE> 101
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of such Trustee or Indenture Trustee.
Unless otherwise specified in the related Prospectus Supplement, each
applicable Trustee and Indenture Trustee may resign at any time, in which event
a successor trustee will be appointed pursuant to the terms of the related
Transfer and Servicing Agreement or Indenture, as applicable. Each applicable
Trustee and Indenture Trustee may be removed if it ceases to be eligible to
continue as such under the related Transfer and Servicing Agreement or
Indenture, as applicable, or if such Trustee or Indenture Trustee becomes
insolvent. Any resignation or removal of such Trustee or Indenture Trustee and
appointment of a successor does not become effective until acceptance of the
appointment by the successor trustee.
Each applicable Trustee or Indenture Trustee shall be entitled to a
fee which, unless otherwise specified in the related Prospectus Supplement, will
be payable on an annual basis by the Servicer. Unless otherwise specified in the
related Prospectus Supplement, the related Transfer and Servicing Agreement or
Indenture, as applicable, will further provide that such Trustee or Indenture
Trustee will be entitled to indemnification by the Servicer for, and will be
held harmless against, any loss, liability, or expense incurred by such Trustee
or Indenture Trustee not resulting from such Trustee's or Indenture Trustee's
own willful misfeasance, bad faith, or negligence (other than errors in
judgment) or by reason of breach of any of their respective representations or
warranties set forth in the related Transfer and Servicing Agreement or
Indenture, as applicable, except to the extent that such loss, liability, or
expense relates to a specific Contract or Contracts or certain taxes that could
be asserted against such Trustee or Indenture Trustee, the related Trust or the
related Contracts, in which case such Trustee or Indenture Trustee would be
entitled to be indemnified by the applicable Trust.
Onyx may maintain other banking relationships with each applicable
Trustee or Indenture Trustee in the ordinary course of business.
ADMINISTRATION AGREEMENT
With respect to a Trust that issues Notes Onyx or another party
specified in the related Prospectus Supplement, in its capacity as administrator
(the "ADMINISTRATOR"), may enter into an agreement (as amended and supplemented
from time to time, an "ADMINISTRATION AGREEMENT") with such Trust and the
related Indenture Trustee pursuant to which the Administrator will agree, to the
extent provided in such Administration Agreement, to provide the notices and to
perform other administrative obligations required by the related Indenture.
Unless otherwise specified in the related Prospectus Supplement with respect to
any such Trust, as compensation for the performance of the Administrator's
obligations under the applicable Administration Agreement and as reimbursement
for its expenses related thereto, the Administrator will be entitled to a
monthly administration fee of such amount as may be set forth in the related
Prospectus Supplement (the "ADMINISTRATION FEE"), which fee will be paid by the
Servicer.
THE INDENTURE
The following summary describes certain terms of each Indenture
pursuant to which the Notes, if any, of a series will be issued. A form of
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. This summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions of
each applicable Indenture and the related Prospectus Supplement.
MODIFICATION OF INDENTURE
With respect to each Trust that has issued Notes pursuant to an
Indenture, unless otherwise provided in the related Prospectus Supplement, the
Trust and the Indenture Trustee may, with the consent of the holders of Notes of
the related series evidencing not less than 51% of the principal amount of such
Notes then outstanding, acting as a single class, and with the consent of the
related Security Insurer, if any, execute a supplemental indenture to add
provisions
-30-
<PAGE> 102
to, change in any manner or eliminate any provisions of, the related
Indenture, or modify (except as provided below) in any manner the rights of the
related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series that includes Notes, without the consent of the holder of
each such outstanding Note affected thereby no supplemental indenture will: (i)
change the due date of any installment of principal of or interest on any such
Note or reduce the principal amount thereof, the interest rate specified thereon
or the redemption price with respect thereto or change any place of payment
where or the coin or currency in which any such Note or any interest thereon is
payable; (ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Contracts if the proceeds
of such sale would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding Notes of such series; (vi) decrease the
percentage of the aggregate principal amount of such Notes required to amend the
sections of the related Indenture which specify the applicable percentage of
aggregate principal amount of the Notes of such series necessary to amend such
Indenture or certain other related agreements; or (vii) permit the creation of
any lien ranking prior to or on a parity with the lien of the related Indenture
with respect to any of the collateral for such Notes or, except as otherwise
permitted or contemplated in such Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such Note of the
security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement
with respect to a series that includes Notes, the related Trust and the
applicable Indenture Trustee may also enter into supplemental indentures,
without obtaining the consent of the Noteholders of the related series, but with
the consent of the related Security Insurer, if any, for the purpose of, among
other things, adding any provisions to or changing in any manner or eliminating
any of the provisions of the related Indenture or of modifying in any manner the
rights of such Noteholders; provided that such action will not materially and
adversely affect the interest of any such Noteholder.
INDENTURE EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the Notes of a given series, unless otherwise
specified in the related Prospectus Supplement, "INDENTURE EVENTS OF DEFAULT"
under the related Indenture will consist of: (i) a default for five days or more
in the payment of any interest on any such Note; (ii) a default in the payment
of the principal of or any installment of the principal of any such Note when
the same becomes due and payable; (iii) a default in the observance or
performance of any covenant or agreement of the applicable Trust made in the
related Indenture and the continuation of any such default for a period of 90
days after notice thereof is given to such Trust by the applicable Indenture
Trustee or if applicable, the related Security Insurer, or to such Trust and
such Indenture Trustee by the holders of at least 25% in principal amount of
such Notes then outstanding acting together as a single class; (iv) any
representation or warranty made by such Trust in the related Indenture or in any
certificate delivered pursuant thereto or in connection therewith having been
incorrect in a material respect as of the time made, and such breach not having
been cured within 30 days after notice thereof is given to such Trust by the
applicable Indenture Trustee or, if applicable, the related Security Insurer, or
to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding acting together as a single
class; or (v) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust. Unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Indenture Event of Default
until the final scheduled Distribution Date for such class of Notes.
With respect to each series that includes Notes, the rights and
remedies of the related Indenture Trustee, the related holders of such Notes,
and the related Security Insurer, if any, will be described in the related
Prospectus Supplement.
-31-
<PAGE> 103
CERTAIN COVENANTS
Unless otherwise specified in a Prospectus Supplement with respect to
a series that includes Notes, each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments upon
the Notes of the related series and the performance or observance of every
agreement and covenant of such Trust under the Indenture, (iii) no Indenture
Event of Default shall have occurred and be continuing immediately after such
merger or consolidation, (iv) such Trust has been advised that the rating of the
Securities of such series then in effect would not be reduced or withdrawn by
any Rating Agency as a result of such merger or consolidation and (v) such Trust
has received an opinion of counsel to the effect that such consolidation or
merger would have no material adverse tax consequence to the Trust or to any
holder of the Securities of such series.
Each Trust that has issued Notes will not, among other things, (i)
except as expressly permitted by the applicable Indenture, the applicable
Transfer and Servicing Agreements or certain related documents with respect to
such Trust (collectively, the "RELATED DOCUMENTS"), sell, transfer, exchange or
otherwise dispose of any of the assets of such Trust, (ii) claim any credit on
or make any deduction from the principal and interest payable in respect of the
Notes of the related series (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former holder
of such Notes because of the payment of taxes levied or assessed upon such
Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the validity
or effectiveness of the related Indenture to be impaired or permit any person to
be released from any covenants or obligations with respect to such Notes under
such Indenture except as may be expressly permitted thereby or (v) permit any
lien, charge, excise, claim, security interest, mortgage or other encumbrance to
be created on or extend to or otherwise arise upon or burden the assets of such
Trust or any part thereof, or any interest therein or the proceeds thereof.
No Trust that has issued Notes will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes and
the related Indenture, or otherwise in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT
Each Trust that has issued Notes will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee for each Trust that has issued Notes will be
required to mail each year to all related Noteholders a brief report relating to
its eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by such Trust to
the applicable Indenture Trustee in its individual capacity, the property and
funds physically held by such Indenture Trustee as such and any action taken by
it that materially affects the related Notes and that has not been previously
reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An Indenture will be discharged with respect to the collateral
securing the related Notes upon the delivery to the related Indenture Trustee
for cancellation of all such Notes or, with certain limitations, upon deposit
with such Indenture Trustee of funds sufficient for the payment in full of all
such Notes.
THE INDENTURE TRUSTEE
Certain matters relating to the Indenture Trustee for each series
that includes Notes are described under "Description of the Transfer and
Servicing Agreements--The Trustee and Indenture Trustee".
-32-
<PAGE> 104
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The transfer of Contracts by Onyx and any Selling Subsidiary to the
Seller, and by the Seller to the applicable Trust, and, if applicable, the
pledge thereof to an Indenture Trustee, the perfection of the security interests
in the Contracts and the enforcement of rights to realize on the related
Financed Vehicles as collateral for the Contracts are subject to a number of
federal and state laws, including the Uniform Commercial Code (the "UCC") as in
effect in various states. The Servicer and the Seller will take the action
described below to perfect the rights of the applicable Trustee and, if
applicable, the Indenture Trustee in the Contracts. If, through inadvertence or
otherwise, another party purchases (including the taking of a security interest
in) a Contract for new value in the ordinary course of its business, without
actual knowledge of the Trust's interest therein and, if applicable, the
Indenture Trustee's interest therein, and takes possession of such Contract,
such purchaser would acquire an interest in the Contracts superior to the
interest of the Trust and, if applicable, the interest of such Indenture
Trustee.
Unless otherwise specified in the related Prospectus Supplement,
under each Sale and Servicing Agreement, Pooling and Servicing Agreement or
Indenture, as applicable, the applicable Trustee or Indenture Trustee initially
will have custody of the Contracts included in the Trust Property of a Trust
following the sale of the Contracts to the related Trust and, if applicable, the
pledge thereof to the related Indenture Trustee, and will hold the Contracts as
bailee for the benefit of such Trust or as secured party. The Servicer may be
appointed by the applicable Trustee or Indenture Trustee to act as the custodian
of the Contracts. Upon such appointment physical possession of the Contracts
would shift from such Trustee or Indenture Trustee to the Servicer. While the
Contracts will not be physically marked to indicate the ownership interest
thereof by the Trust, appropriate UCC-1 financing statements will be filed to
perfect by filing and give notice of the Trust's ownership interest in, and, if
applicable, the Indenture Trustee's security interest in, the Contracts. If,
through inadvertence or otherwise, any of the Contracts were sold to another
party who purchased such Contracts in the ordinary course of its business and
took possession of such Contracts, the purchaser would acquire an interest in
the Contracts superior to the interests of the Trust if the purchaser acquired
the Contracts in good faith, for value and without actual knowledge of the
Trust's ownership interest in the Contracts.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General. Retail installment sale contracts such as the Contracts
evidence the credit sale of automobiles and/or light duty trucks by dealers to
consumers. The contracts also constitute personal property security agreements
and include grants of security interests in the vehicles under the applicable
UCC. In most states, a security interest in automobiles and/or light duty trucks
is perfected by obtaining the certificate of title to the Financed Vehicle or
notation of the secured party's lien on the vehicles' certificate of title. The
Seller will warrant to the related Trust in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, that Onyx or a subsidiary of
Onyx has taken all steps necessary to obtain a perfected first priority security
interest with respect to all Financed Vehicles securing the Contracts and that
such security interest has been assigned to such Trust. If Onyx fails, because
of clerical errors or otherwise, to effect or maintain the notation of such
security interest on the certificate of title relating to a Financed Vehicle,
such Trust may not have a first priority security interest in such Financed
Vehicle.
Perfection. The Seller will sell the Contracts and assign the
security interest in each Financed Vehicle to the related Trust. However,
because of the administrative burden and expense, such Trust will not amend the
certificates of title to identify such Trust as the new secured party.
Accordingly, Onyx or a subsidiary of Onyx will continue to be named as the
secured party on the certificates of title relating to the Financed Vehicles.
Under the law of California and most other states, the assignment of the
Contracts is an effective conveyance of the security interests in the Financed
Vehicles without amendment of the lien noted on the related certificate of title
and the new secured party succeeds to the assignor's rights as the secured
party. However, there exists a risk in not identifying the related Trust as the
new secured party on the certificate of title that, through fraud or negligence,
the security interest of such Trust could be released.
-33-
<PAGE> 105
In the absence of fraud or forgery by the Financed Vehicle owner or
administrative error by state recording officials, notation of the lien of Onyx
or a subsidiary of Onyx will be sufficient to protect the related Trust against
the rights of subsequent purchasers of a Financed Vehicle or subsequent lenders
who take a security interest in a Financed Vehicle. If there are any Financed
Vehicles as to which Onyx or a subsidiary of Onyx has failed to perfect the
security interest assigned to the related Trust, such security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles and
holders of perfected security interests.
In the event that the owner of a Financed Vehicle relocates to a
state other than the state in which the Financed Vehicle was registered at the
inception of the Contract, under the laws of most states the perfected security
interest in the Financed Vehicle would continue for four months after such
relocation and thereafter, in most instances, until the owner re-registers the
Financed Vehicle in such state. A majority of states generally require surrender
of a certificate of title to re-register a vehicle. Therefore, the Servicer will
provide the department of motor vehicles or other appropriate state or county
agency of the state of relocation with the certificate of title so that the
owner can effect the re-registration. If the Financed Vehicle owner moves to a
state that provides for notation of lien on the certificate of title to perfect
the security interests in the Financed Vehicle, Onyx or a subsidiary of Onyx,
absent clerical errors or fraud, would receive notice of surrender of the
certificate of title if its lien is noted thereon. Each subsidiary of Onyx named
as the secured party on a certificate of title will agree to promptly forward to
Onyx any such notice received by such subsidiary. Accordingly, Onyx will have
notice and the opportunity to re-perfect the security interest in the Financed
Vehicle in the state of relocation. If the Financed Vehicle owner moves to a
state which does not require surrender of a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of motor vehicle installment sales
contracts, Onyx takes steps to effect such re-perfection upon receipt of notice
of registration or information from the obligor as to relocation. Similarly,
when an obligor under a Contract sells a Financed Vehicle, the Servicer must
provide the owner with the certificate of title, or the Servicer will receive
notice as a result of its lien or its subsidiary's lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
Contract before release of the lien. Under the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, Onyx, at its cost, will be
obligated to maintain the continuous perfection of the security interest of Onyx
or its subsidiary in the Financed Vehicle.
Under the laws of most states (including California), certain
statutory liens such as liens for unpaid taxes, liens for towing and storage of
and repairs performed on a motor vehicle, motor vehicle accident liens, and
liens arising under various state and federal criminal statutes take priority
even over a perfected security interest. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of most states and federal law permit the confiscation
of motor vehicles by governmental authorities under certain circumstances if
used in or acquired with the proceeds of unlawful activities, which may result
in the loss of a secured party's perfected security interest in a confiscated
vehicle. The Seller will represent in each Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, that, as of the initial issuance
of the Securities of the related series, no such state or federal liens exist
with respect to any Financed Vehicle securing payment on any related Contract.
However, such liens could arise, or such a confiscation could occur, at any time
during the term of a Contract. No notice will be given to the Servicer in the
event such a lien arises or such a confiscation occurs, and any such lien
arising or confiscation occurring after the related Closing Date would not give
rise to the Seller's repurchase obligations under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
REPOSSESSION
In the event of default by an obligor, the holder of the related
retail installment sale contract has all the remedies of a secured party under
the UCC, except where specifically limited by other state laws. Among the UCC
remedies, the secured party has the right to perform repossession by self-help
means, unless such means would constitute a breach of the peace or is otherwise
limited by applicable state law. Unless a financed vehicle is voluntarily
surrendered, self-help repossession is accomplished simply by retaking
possession of the financed vehicle. In cases where the obligor objects or raises
a defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the financed
vehicle must then be recovered in accordance with that order. In some
jurisdictions, the secured party is required to notify the obligor of the
default and the intent to repossess the collateral and to give the obligor a
time period within which to cure the default prior to repossession. Generally,
this
-34-
<PAGE> 106
right of cure may only be exercised on a limited number of occasions during
the term of the related contract. Other jurisdictions permit repossession
without prior notice if it can be accomplished without a breach of the peace
(although in some states, a course of conduct in which the creditor has accepted
late payments has been held to create a right by the obligor to receive prior
notice). In most states, under certain circumstances after the financed vehicle
has been repossessed, the obligor may reinstate the related contract by paying
the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
addition, some states also impose substantive timing requirements on the sale of
repossessed vehicles in certain circumstances and/or various substantive timing
and content requirements on such notices. In some states, under certain
circumstances after a financed vehicle has been repossessed, the obligor may
redeem the collateral by paying the delinquent installments and other amounts
due. The obligor has the right to redeem the collateral prior to actual sale or
entry by the secured party into a contract for sale of the collateral by paying
the secured party the unpaid principal balance of the obligation, accrued
interest thereon, reasonable expenses for repossessing, holding, and preparing
the collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees and legal expenses or in some other
states, by payment of delinquent installments on the unpaid principal balance of
the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in those states
that do not prohibit or limit such judgments. In addition to the notice
requirement, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable". Generally, courts have held that when a sale is not
"commercially reasonable", the secured party loses its right to a deficiency
judgment.
In addition, the UCC permits the debtor or other interested party to
recover for any loss caused by noncompliance with the provisions of the UCC.
Also, prior to a sale, the UCC permits the debtor or other interested person to
prohibit the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC. Any deficiency judgment would be a personal judgment
against the obligor for the shortfall, and a defaulting obligor can be expected
to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a repossessed vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case, the
UCC requires the creditor to remit the surplus to any holder of a subordinate
lien with respect to such vehicle or if no such lienholder exists, the UCC
requires the creditor to remit the surplus to the obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of
the National Consumer Act and of the Uniform Consumer Credit Code, state motor
vehicle retail installment sales acts, state "lemon" laws and other similar
laws. Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors
-35-
<PAGE> 107
who fail to comply with their provisions. In some cases, this liability could
affect an assignee's ability to enforce consumer finance contracts such as the
Contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC RULE"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, other statutes or the common law, has the
effect of subjecting any assignee of the seller in a consumer credit transaction
(and certain related creditors and their assignees) to all claims and defenses
which the obligor in the transaction could assert against the seller. Liability
under the FTC Rule is limited to the amounts paid by the obligor under the
contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the obligor. The FTC Rule is generally
duplicated by the Uniform Consumer Credit Code, other state statutes or the
common law in certain states.
Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Contracts, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. As to each
obligor, such claims are limited to a maximum liability equal to the amounts
paid by the obligor on the related Contract. The Seller will represent in each
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable,
that each of the Contracts, and the sale of the related Financed Vehicle
thereunder, complied with all material requirements of such laws and the
regulations issued pursuant thereto.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by amounts
payable to the Securityholders from amounts available under a credit enhancement
mechanism, could result in losses to the Securityholders.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of such obligor's
Contract (including an obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the obligor's Contract and is
later called to active duty) may not be charged interest above an annual rate of
6% during the period of such obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances, California residents called
into active duty with the reserves can delay payments on retail installment
sales contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect the full amount of interest owing on certain of the Contracts. In
addition, the Relief Acts impose limitations that would impair the ability of
the Servicer to repossess an affected Contract during the obligor's period of
active duty status. Thus, in the event that
-36-
<PAGE> 108
such a Contract goes into default, there may be delays and losses occasioned by
the inability to exercise the Trust's rights with respect to the related
Financed Vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by amounts
payable to the Securityholders from amounts available under a credit enhancement
mechanism, could result in losses to the Securityholders.
REPURCHASE OBLIGATION
Under each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will make representations and warranties relating to
validity, subsistence, perfection and priority of the security interest in each
related Financed Vehicle as of the related Closing Date. See "Description of the
Transfer and Servicing Agreements-- Sale and Assignment of the Contracts".
Accordingly, if any defect exists in the perfection of the security interest in
any Financed Vehicle as of the Closing Date and such defect adversely affects
the related Trust's interest in the related Contract, such defect would
constitute a breach of a warranty under the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, and would create an obligation
of the Seller to repurchase such Contract unless the breach is cured.
Additionally, in Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, the Servicer will make certain representations,
warranties and affirmative covenants regarding, among other things, the
maintenance of the security interest in each Financed Vehicle, the breach of
which would create an obligation of the Servicer to purchase any affected
Contract from the related Trust unless the breach is cured.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the Notes
and the Certificates of any series, to the extent it relates to matters of law
or legal conclusions with respect thereto, represents the opinion of tax counsel
to each Trust with respect to the related series on the material matters
associated with such consequences, subject to the qualifications set forth
herein. "Tax Counsel" with respect to each Trust will be Andrews & Kurth L.L.P.
The summary does not purport to deal with federal income tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. For example, it does not discuss the tax treatment of Noteholders
or Certificateholders that are insurance companies, regulated investment
companies or dealers in securities. Moreover, there are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving both debt and
equity interests issued by a trust with terms similar to those of the Notes and
the Certificates. As a result, the IRS may disagree with all or a part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the
Internal Revenue Code of 1986, as amended (the "CODE"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Tax Counsel regarding certain federal income tax matters
discussed below. An opinion of Tax Counsel, however, is not binding on the IRS
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary depending on
whether an election is made to treat the Trust as a partnership under the Code
or whether the Trust will be treated as a grantor trust. The Prospectus
Supplement for each series of Certificates will specify whether a partnership
election will be made or the Trust will be treated as a grantor trust.
-37-
<PAGE> 109
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
The following general discussion of the anticipated federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust for which a partnership election will be made, to the
extent it relates to matters of law or legal conclusions with respect thereto,
represents the opinion of Tax Counsel to each Trust with respect to the related
series on the material matters associated with such consequences, subject to the
qualifications set forth herein. In addition, Tax Counsel has prepared or
reviewed the statements in the Prospectus under the heading "Certain Federal
Income Tax Consequences--Trusts for Which a Partnership Election is Made", and
is of the opinion that such statements are correct in all material respects.
Such statements are intended as an explanatory discussion of the related tax
matters affecting investors generally, but do not purport to furnish information
in the level of detail or with the attention to an investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, each investor is advised to consult its own tax advisors with
regard to the tax consequences to it of investing in Notes or Certificates.
Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the Trust Agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Contracts, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes and distributions on the Certificates, and Certificateholders could be
liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and
the Noteholders will agree by their purchase of Notes, to treat the Notes as
debt for federal income tax purposes. Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. The discussion below
assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Strip Notes. Moreover, the discussion assumes that the interest formula for
the Notes meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID REGULATIONS") relating to original issue discount ("OID"),
and that any OID on the Notes (i.e., any excess of the principal amount of the
Notes over their issue price) does not exceed a de minimis amount (i.e., 1/4% of
their principal amount multiplied by the number of full years included in their
term), all within the meaning of the OID regulations. If these conditions are
not satisfied with respect to any given series of Notes, additional tax
considerations with respect to such Notes will be disclosed in the applicable
Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except
as discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. A purchaser who
buys a Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
-38-
<PAGE> 110
A holder of a Note that has a fixed maturity date of not more than
one year from the issue date of such Note (a "SHORT-TERM NOTE") may be subject
to special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid (or, if earlier, upon the
taxable disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder
who is a nonresident alien, foreign corporation or other non-United States
person (a "FOREIGN PERSON") generally will be considered "portfolio interest",
and generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Owner Trustee or other person who is otherwise required to
withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or
other taxable disposition of a Note by a foreign person will be exempt from
United States federal income and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Final regulations dealing with withholding tax on income paid to
foreign persons and related matters (the "NEW WITHHOLDING REGULATIONS") were
issued by the Treasury Department on October 6, 1997. The New Withholding
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors who are foreign
persons are strongly urged to consult their own tax advisors with respect to the
New Withholding Regulations.
Backup Withholding. Each holder of a Note (other than an exempt
holder such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject
-39-
<PAGE> 111
to backup withholding. Should a nonexempt Noteholder fail to provide the
required certification, the Trust will be required to withhold 31 percent of the
amount otherwise payable to the holder, and remit the withheld amount to the IRS
as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
more likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer
will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders (including
the Seller in its capacity as recipient of distributions from the reserve fund,
if any), and the Notes being debt of the partnership. However, the proper
characterization of the arrangement involving the Trust, the Certificates, the
Notes, the Seller and the Servicer is not clear because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Partnership Taxation. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Contracts (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Contracts. The Trust's deductions will consist
primarily of interest accruing with respect to the Notes, servicing and other
fees, and losses or deductions upon collection or disposition of Contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust for each month equal to the sum of (i) the interest that
accrues on the Certificates in accordance with their terms for such month,
including interest accruing at the Pass-Through Rate for such month and interest
on amounts previously due on the Certificates but not yet distributed; (ii) any
Trust income attributable to discount on the Contracts that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation
-40-
<PAGE> 112
will be reduced by any amortization by the Trust of premium on Contracts that
corresponds to any excess of the issue price of Certificates over their
principal amount. All remaining taxable income of the Trust will be allocated to
the Seller. Based on the economic arrangement of the parties, this approach for
allocating Trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, even
under the foregoing method of allocation, Certificateholders may be allocated
income equal to the entire Pass-Through Rate plus the other items described
above even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions and thus allowable as a deduction only to the extent that in the
aggregate all such expenses exceed two percent of such individual tax payer's
adjusted gross income. Furthermore, certain otherwise allowable itemized
deductions will be reduced, but not by more than 80%, by an amount equal to 3%
of the individual's adjusted gross income in excess of a statutorily defined
threshold. Therefore, such deductions might be disallowed to the individual in
whole or in part and might result in such holder being taxed on an amount of
income that exceeds the amount of cash actually distributed to such holder over
the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Contact, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Contracts were not
issued with OID, and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the Contracts may be greater or less
than the remaining principal balance of the Contracts at the time of purchase.
If so, the Contracts will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a Contract-by-Contract
basis.)
If the Trust acquires the Contracts at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Contracts or to offset any such premium against
interest income on the Contracts. As indicated above, a portion of such market
discount income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
contribute its assets to a new partnership and, immediately thereafter, the
terminated partnership distributes interests in the new partnership to the
partners in liquidation of the terminated partnership. The Trust will not comply
with certain technical requirements that might apply when such a constructive
termination occurs. As a result, the Trust may be subject to certain tax
penalties and may incur additional expenses if it is required to comply with
those requirements. Furthermore, the Trust might not be able to comply due to
lack of data.
-41-
<PAGE> 113
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the Contracts would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have
kept complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be set forth in the related Prospectus Supplement. The Trustee
will file a partnership information return (IRS Form 1065) with the IRS for each
taxable year of the Trust and will report each Certificateholder's allocable
share of items of Trust income and expense to holders and the IRS on Schedule
K-1. The Trust will provide the Schedule K-1 information to nominees that fail
to provide the Trust with the information statement described below and such
nominees will be required to forward such information to the beneficial owners
of the Certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the Trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number
-42-
<PAGE> 114
of the nominee and (ii) as to each beneficial owner (x) the name, address and
identification number of such person, (y) whether such person is a United States
person, a tax-exempt entity or a foreign government, an international
organization, or any wholly owned agency or instrumentality of either of the
foregoing, and (z) certain information on Certificates that were held, bought or
sold on behalf of such person throughout the year. In addition, brokers and
financial institutions that hold Certificates through a nominee are required to
furnish directly to the Trust information as to themselves and their ownership
of Certificates. A clearing agency registered under Section 17A of the Exchange
Act is not required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described above
may be subject to penalties.
The Seller will be designated as the tax matters partner in the
related Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear
whether the Trust would be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
non-U.S. persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, the Trust will withhold as if it were so engaged in
order to protect the Trust from possible adverse consequences of a failure to
withhold. The Trust expects to withhold on the portion of its taxable income
that is allocable to foreign Certificateholders pursuant to Section 1446 of the
Code, as if such income were effectively connected to a U.S. trade or business,
at a rate of 35% for foreign holders that are taxable as corporations and 39.6%
for all other foreign holders. The New Withholding Regulations or subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's withholding status, the Trust may rely on IRS Form W-8,
IRS Form W-9 or the holder's certification of nonforeign status signed under
penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest." As a result, Certificateholders will be subject to United States
federal income tax and withholding tax at a rate of 30 percent, unless reduced
or eliminated pursuant to an applicable treaty. In such case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale of the Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Certificateholder fails to comply
with certain identification procedures, unless the holder is an exempt recipient
under applicable provisions of the Code.
-43-
<PAGE> 115
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
The following general discussion of the anticipated federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust for which a partnership election will not be made, to
the extent it relates to matters of law or legal conclusions with respect
thereto, represents the opinion of Tax Counsel to each Trust with respect to the
related series on the material matters associated with such consequences,
subject to the qualifications set forth herein. In addition, Tax Counsel has
prepared or reviewed the statements in the Prospectus under the heading "Certain
Federal Income Tax Consequences--Trusts Treated as Grantor Trusts", and is of
the opinion that such statements are correct in all material respects. Such
statements are intended as an explanatory discussion of the possible effects of
the classification of any Trust as a grantor trust for federal income tax
purposes on investors generally and of related tax matters affecting investors
generally, but do not purport to furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. Accordingly, each investor is advised
to consult its own tax advisors with regard to the tax consequences to it of
investing in Notes or Certificates.
If a partnership election is not made, Tax Counsel will deliver its
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code. In
this case, owners of Certificates (referred to herein as "GRANTOR TRUST
CERTIFICATEHOLDERS") will be treated for federal income tax purposes as owners
of a portion of the Trust's assets as described below. The Certificates issued
by a Trust that is treated as a grantor trust are referred to herein as "GRANTOR
TRUST CERTIFICATES".
Characterization. Each Grantor Trust Certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust represented by the Grantor Trust Certificates
and will be considered the equitable owner of a pro rata undivided interest in
each of the Contracts in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Contract because of
a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on
its federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Contracts in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. A Grantor Trust
Certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid to the
Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions as
they become due or are paid to the Servicer, whichever is earlier. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Contracts. The Contracts would then be subject to the "coupon
stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Contract based on
each Contract's relative fair market value, so that such holder's undivided
interest in each Contract will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Contracts at a premium may elect
to amortize such premium under a constant interest method. Amortizable bond
-44-
<PAGE> 116
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest payments. It is
not clear whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under Section 171. A Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate acquired at a
premium should recognize a loss if a Contract prepays in full, equal to the
difference between the portion of the prepaid principal amount of such Contract
that is allocable to the Grantor Trust Certificate and the portion of the
adjusted basis of the Grantor Trust Certificate that is allocable to such
Contract. If a reasonable prepayment assumption is used to amortize such
premium, it appears that such a loss would be available, if at all, only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear,
based on guidance issued by the IRS, each purchaser of a Grantor Trust
Certificate will be treated as the purchaser of a stripped bond which generally
should be treated as a single debt instrument issued on the day it is purchased
for purposes of calculating any original issue discount. Generally, under
applicable Treasury regulations (the "SECTION 1286 TREASURY REGULATIONS"), if
the discount on a stripped bond is larger than a de minimis amount (as
calculated for purposes of the OID rules of the Code) such stripped bond will be
considered to have been issued with OID. See "Original Issue Discount". Based on
the preamble to the Section 1286 Treasury Regulations, Tax Counsel is of the
opinion that, although the matter is not entirely clear, the interest income on
the Certificates at the sum of the Pass-Through Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286 Treasury
Regulations and such income will be so treated in the Trustee's tax information
reporting.
Original Issue Discount. The IRS has stated in published rulings
that, in circumstances similar to those described herein, the special rules of
the Code relating to "original issue discount" (currently Sections 1271 through
1273 and 1275) will be applicable to a Grantor Trust Certificateholder's
interest in those Contracts meeting the conditions necessary for these sections
to apply. Generally, a Grantor Trust Certificateholder that acquires an
undivided interest in a Contract issued or acquired with OID must include in
gross income the sum of the "daily portions," as defined below, of the OID on
such Contract for each day on which it owns a Certificate, including the date of
purchase but excluding the date of disposition. In the case of an original
Grantor Trust Certificateholder, the daily portions of OID with respect to a
Contract generally would be determined as follows. A calculation will be made of
the portion of OID that accrues on the Contract during each successive monthly
accrual period (or shorter period in respect of the date of original issue or
the final Distribution Date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the Contract under the prepayment assumption used in
respect of the Contracts and (ii) any payments received during such accrual
period, and subtracting from that total the "adjusted issue price" of the
Contract at the beginning of such accrual period. No representation is made that
the Contracts will prepay at any prepayment assumption. The "adjusted issue
price" of a Contract at the beginning of the first accrual period is its issue
price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Contract at the beginning of a subsequent accrual
period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such accrual period will then be divided by the number of days in the
period to determine the daily portion of OID for each day in the period. With
respect to an initial accrual period shorter than a full monthly accrual period,
the daily portions of OID must be determined according to a reasonable method,
provided that such method is consistent with the method used to determine the
yield to maturity of the Contracts.
-45-
<PAGE> 117
With respect to the Contracts, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Contracts. Subsequent purchasers that purchase
Contracts at more than a de minimis discount should consult their tax advisors
with respect to the proper method to accrue such OID.
The Taxpayer Relief Act of 1997 requires the use of a prepayment
assumption to accrue OID with respect to "any pool of debt instruments the yield
on which may be affected by reason of prepayments (or to the extent provided in
regulation, by reason of other events)." Unless otherwise provided in the
related Prospectus Supplement, the Trustee will deem the prepayment assumption
to be that the Contracts will not prepay. If the IRS were to require that OID be
computed using a different prepayment assumption, the character and timing of a
Certificateholder's income could be adversely affected.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Contracts may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Contract is
considered to have been purchased at a "market discount." Generally, the amount
of market discount is equal to the excess of the portion of the principal amount
of such Contract allocable to such holder's undivided interest over such
holder's tax basis in such interest. Market discount with respect to a Grantor
Trust Certificate will be considered to be zero if the amount allocable to the
Grantor Trust Certificate is less than 0.25% of the Grantor Trust Certificate's
stated redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under Code Sections 1276
through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
shall be treated as ordinary income to the extent that it does not exceed the
accrued market discount at the time of such payment. The amount of accrued
market discount for purposes of determining the tax treatment of subsequent
principal payments or dispositions of the market discount bond is to be reduced
by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market
discount also may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Grantor Trust Certificate purchased with market discount.
For these purposes, the de minimis rule referred above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income.
-46-
<PAGE> 118
If such holder elects to include market discount in income currently as it
accrues on all market discount instruments acquired by such holder in that
taxable year or thereafter, the interest deferral rule described above will not
apply.
Premium. To the extent a Grantor Trust Certificateholder is
considered to have purchased an undivided interest in a Contract for an amount
that is greater than its stated redemption price at maturity of such Contract,
such Grantor Trust Certificateholder will be considered to have purchased the
Contract with "amortizable bond premium" equal in amount to such excess. A
Grantor Trust Certificateholder (who does not hold the Certificate for sale to
customers or in inventory) may elect under Section 171 of the Code to amortize
such premium. Under the Code, premium is allocated among the interest payments
on the Contracts to which it relates and is considered as an offset against (and
thus a reduction of) such interest payments. With certain exceptions, such an
election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible as
an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Contracts.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of
a Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, interest or OID paid by the person
required to withhold tax under Section 1441 or 1442 to (i) an owner that is not
a U.S. Person (as defined below) or (ii) a Grantor Trust Certificateholder
holding on behalf of an owner that is not a U.S. Person and accrued OID
recognized by the owner on the sale or exchange of such a Grantor Trust
Certificate will not be subject to withholding to the extent that a Grantor
Trust Certificate evidences ownership in Contracts issued after July 18, 1984 by
natural persons if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that such
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). Additional restrictions apply
to Contracts where the obligor is not a natural person in order to qualify for
the exemption from withholding.
As used herein, a "U.S. PERSON" means a citizen or resident of the
United States, a corporation, a partnership, or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof (except, in the case of a partnership as otherwise provided by
regulations), an estate, the income of which is includible in gross income for
United States federal income tax purposes regardless of its source or a trust
whose administration is subject to the primary supervision of a United States
court and which has one or more United States persons who have authority to
control all substantial decisions of the trust.
-47-
<PAGE> 119
Information Reporting and Backup Withholding. The Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a Grantor Trust Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist Grantor Trust Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold Grantor Trust Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a beneficial
owner fails to supply a certified taxpayer identification number or if the
Secretary of the Treasury determines that such person has not reported all
interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments. Any
amounts deducted and withheld from a distribution to a recipient would be
allowed as a credit against such recipient's federal income tax liability.
CERTAIN STATE TAX CONSEQUENCES WITH RESPECT TO TRUSTS FOR WHICH A
PARTNERSHIP ELECTION IS MADE
The activities to be undertaken by the Servicer in servicing and
collecting the Contracts will take place in California. The State of California
imposes a state individual income tax and a corporate franchise tax on
corporations, partnerships and other entities doing business in the State of
California. This discussion relates only to Trusts for which a partnership
election is made, and is based upon present provisions of California statutes
and the regulations promulgated thereunder, and applicable judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
Because of the variation in each state's tax laws based in whole or
in part upon income, it is impossible to predict tax consequences to holders of
Notes and Certificates in all of the state taxing jurisdictions in which they
are already subject to tax. Noteholders and Certificateholders are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of Notes and Certificates.
For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents shall be deemed
to refer, unless otherwise specified herein, to each Trust for which a
partnership election is made and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Tax Counsel will advise each such Trust that
issues Notes that, assuming the Notes will be treated as debt for federal income
tax purposes, the Notes will be treated as debt for California income and
franchise tax purposes. Accordingly, Noteholders not otherwise subject to
taxation in California should not become subject to taxation in California
solely because of a holder's ownership of Notes. However, a Noteholder already
subject to California's income tax or franchise tax could be required to pay
additional California tax as a result of the holder's ownership or disposition
of Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS A
PARTNERSHIP
Based on a regulation issued by the Franchise Tax Board with respect
to the California tax characterization of an owner trust as a partnership and
not as an association taxable as a corporation or other taxable entity, if the
arrangement created by the Trust Agreement is treated as a partnership (not
taxable as a corporation) for federal income tax purposes, Tax Counsel will
opine that the same treatment should also apply for California tax purposes. In
such case, the resulting partnership should not be subject to the California
franchise tax (which, if applicable, could possibly result in reduced
distributions to Certificateholders).
-48-
<PAGE> 120
Under current law, Certificateholders that are nonresidents of
California and are not otherwise subject to California income tax should not be
subject to California income tax on the income from the constructive
partnership. In any event, classification of the arrangement as a "partnership"
would not cause a Certificateholder not otherwise subject to taxation in
California to pay California tax on income beyond that derived from the
Certificates.
If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity should not be subject to the
California franchise tax (which, if applicable, could result in reduced
distributions to Certificateholders). A Certificateholder not otherwise subject
to tax in California would not become subject to California tax as a result of
its mere ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
NOTEHOLDER'S OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND
CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "BENEFIT PLAN"), from engaging
in certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to such Benefit Plan. ERISA also imposes certain duties on persons who are
fiduciaries of Benefit Plans subject to ERISA and prohibits certain transactions
between a Benefit Plan and parties in interest with respect to such Benefit
Plans. Under ERISA, any person who exercises any authority or control with
respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit Plan (subject to certain exceptions
not here relevant). A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "PLAN ASSETS REGULATION"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. Due to the complexities of the
"prohibited transaction" rules and the penalties imposed upon persons involved
in prohibited transactions, it is important that the fiduciary of any Benefit
Plan considering the purchase of Securities consult with its tax and/or legal
advisors regarding whether the assets of the related Trust would be considered
plan assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
-49-
<PAGE> 121
PLAN OF DISTRIBUTION
Unless otherwise specified in the related Prospectus Supplement, on
the terms and conditions set forth in one or more underwriting agreements with
respect to the Securities of a series (collectively, the "UNDERWRITING
AGREEMENT"), the Seller will agree to cause the related Trust to sell to the
underwriter(s) named therein and in the related Prospectus Supplement, and each
of such underwriters will severally agree to purchase, the principal amount of
each class of Securities, as the case may be, of the related series set forth
therein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, in
the Underwriting Agreement with respect to any given series of Securities, the
applicable underwriter(s) will agree, subject to the terms and conditions set
forth therein, to purchase all the Securities described therein which are
offered hereby and by the related Prospectus Supplement if any of such
Securities are purchased.
Each Prospectus Supplement will either (i) set forth the price at
which each class of Securities being offered thereby will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Securities or (ii) specify that the related Securities
are to be resold by the underwriter(s) in negotiated transactions at varying
prices to be determined at the time of such sale. After the initial public
offering of any such Securities, such public offering prices and such
concessions may be changed.
Unless otherwise specified in the related Prospectus Supplement, each
Underwriting Agreement will provide that Onyx and the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Unless otherwise specified in the related Prospectus Supplement,
pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will
be passed upon for the related Trust, the Seller and the Servicer by Andrews &
Kurth L.L.P. In addition, certain United States federal and California state tax
and other matters will be passed upon for the related Trust by Andrews & Kurth
L.L.P.
-50-
<PAGE> 122
INDEX OF TERMS
<TABLE>
<S> <C>
"Administration Agreement"................................................................................30
"Administration Fee" .....................................................................................30
"Administrator"...........................................................................................30
"APR" ....................................................................................................13
"Auto Finance Centers"....................................................................................10
"Bankruptcy Code" ........................................................................................16
"Benefit Plan" ...........................................................................................49
"Certificate Principal Balance"............................................................................2
"Certificateholders" ......................................................................................8
"Certificates" ............................................................................................i
"Closing Date" ............................................................................................4
"Code" ...................................................................................................37
"Collection Account" .....................................................................................22
"Collection Period" ......................................................................................20
"Commission" ............................................................................................iii
"Contracts" .............................................................................................i,3
"Cut-Off Date" ............................................................................................4
"Dealers" .................................................................................................4
"Defaulted Contract" .....................................................................................21
"Definitive Securities"...................................................................................19
"Distribution Date Statement".............................................................................25
"Distribution Date" ......................................................................................ii
"DTC Rules" ..............................................................................................18
"DTC" .....................................................................................................8
"Due Date" ...............................................................................................11
"Eligible Investments"....................................................................................22
"ERISA" ...................................................................................................5
"Exchange Act" ..........................................................................................iii
"Financed Vehicles" .....................................................................................i,3
"foreign person" .........................................................................................39
"FTC Rule" ...............................................................................................36
"Full Prepayment" ........................................................................................14
"Grantor Trust Certificateholders"........................................................................44
"Grantor Trust Certificates"..............................................................................44
"Holders" ................................................................................................19
"Indenture Events of Default".............................................................................31
"Indenture Trustee" .......................................................................................i
"Indenture" ...............................................................................................1
"Indirect Participants"...................................................................................18
"Insolvency Laws" .........................................................................................6
"Interest Rate" ...........................................................................................2
"IRS" ....................................................................................................37
"Issuer" ..................................................................................................1
"Liquidation Expenses"....................................................................................23
"Monthly P&I" ............................................................................................14
"Motor Vehicle Contracts"..................................................................................9
"Net Insurance Proceeds"..................................................................................23
"Net Liquidation Proceeds"................................................................................23
"New Withholding Regulations".............................................................................39
"Note Principal Balance"...................................................................................2
"Noteholders" .............................................................................................8
"Notes" ...................................................................................................i
"OCS".....................................................................................................11
</TABLE>
-51-
<PAGE> 123
<TABLE>
<S> <C>
"OID regulations".........................................................................................38
"OID" ....................................................................................................38
"Onyx" ..................................................................................................i,1
"Original Pool Balance"...................................................................................15
"Participants" ...........................................................................................18
"Pass-Through Rate" .......................................................................................2
"Payahead Account" .......................................................................................23
"Payaheads" ..............................................................................................23
"Plan Assets Regulation"..................................................................................49
"Pool Balance" ...........................................................................................15
"Pooling and Servicing Agreement"..........................................................................1
"Prefunded Amount" .......................................................................................14
"Prefunding Account" .....................................................................................14
"Prefunding Arrangement"................................................................................4,14
"Prospectus Supplement"....................................................................................i
"Purchase Agreement" .....................................................................................16
"Rating Agency" ...........................................................................................5
"Recomputed Actuarial Method".............................................................................14
"Recomputed Yield" .......................................................................................13
"Registration Statement".................................................................................iii
"Related Documents" ......................................................................................32
"Repurchase Amount" ......................................................................................22
"Rule of 78's Contracts"..................................................................................13
"Sale and Servicing Agreement".............................................................................4
"Section 1286 Treasury Regulations".......................................................................45
"Securities Act" ......................................................................................iii,1
"Securities" ..............................................................................................i
"Security Insurance Policy"................................................................................4
"Security Insurer" ........................................................................................4
"Security Owners" ........................................................................................18
"Securityholders" .........................................................................................8
"Seller" ................................................................................................i,1
"Selling Subsidiary" ......................................................................................4
"Servicer Default" .......................................................................................27
"Servicer Report Date"....................................................................................23
"Servicer" ................................................................................................i
"Servicing Fee Rate" .....................................................................................25
"Servicing Fee" ..........................................................................................25
"Simple Interest Contracts"...............................................................................13
"Simple Interest Method"..................................................................................13
"Strip Certificates" ......................................................................................3
"Strip Notes" .............................................................................................2
"Subsequent Contracts"..................................................................................4,14
"Transfer and Servicing Agreements".......................................................................21
"Trust Accounts" .........................................................................................23
"Trust Agreement" .........................................................................................1
"Trust Property" ........................................................................................3,8
"Trustee" .................................................................................................i
"Trust" ................................................................................................i, 1
"UCC" ..................................................................................................6,33
"Underwriting Agreement"..................................................................................50
</TABLE>
-52-
<PAGE> 124
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE SELLER OR THE UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF A TIME SUBSEQUENT TO THE DATE OF
SUCH INFORMATION. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Available Information................................. ii
Reports to Certificateholders......................... iii
Summary of Terms...................................... S-1
Risk Factors.......................................... S-9
The Trust............................................. S-11
The Onyx Portfolio of Motor Vehicle Contracts......... S-11
The Contracts......................................... S-13
Maturity and Prepayment Considerations................ S-16
Yield Considerations.................................. S-16
Use of Proceeds....................................... S-16
The Certificates and the Agreement S-16
Description of the Insurer............................ S-23
Erisa Considerations.................................. S-24
Underwriting.......................................... S-27
Legal Matters......................................... S-27
Index of Terms........................................ S-28
PROSPECTUS PAGE
Available Information................................. iii
Incorporation of Certain Documents by Reference....... iii
Summary of Terms...................................... 2
Risk Factors.......................................... 6
The Trusts............................................ 8
The Trustee........................................... 9
The Onyx Portfolio of Motor Vehicle Contracts......... 9
The Contracts......................................... 13
Prefunding Arrangements............................... 14
Maturity and Prepayment Assumptions................... 14
Pool Factor and Pool Information...................... 15
Use of Proceeds....................................... 15
The Seller............................................ 15
The Servicer.......................................... 16
Description of Securities............................. 17
Description of the Transfer and Servicing Agreements.. 21
The Indenture......................................... 30
Certain Legal Aspects of the Contracts................ 33
Certain Federal Income Tax Consequences............... 37
Trusts for Which a Partnership Election is Made....... 38
Trusts Treated As Grantor Trusts...................... 44
Certain State Tax Consequences with Respect
To Trusts For Which A Partnership Election Is Made 48
Erisa Considerations.................................. 49
Plan of Distribution.................................. 50
Legal Opinions........................................ 50
Index of Terms........................................ 51
</TABLE>
UNTIL ________, 199_ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT) ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$__________
ONYX ACCEPTANCE
GRANTOR TRUST 199_-_
____% AUTO LOAN
PASS-THROUGH CERTIFICATES,
SERIES 199_-_
[ONYX LOGO]
ONYX ACCEPTANCE FINANCIAL CORPORATION,
Seller
ONYX ACCEPTANCE CORPORATION,
Servicer
----------------------------------------
P R O S P E C T U S S U P P L E M E N T
----------------------------------------
[UNDERWRITERS]
[DATE]
================================================================================
<PAGE> 125
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE SELLER OR THE UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF A TIME SUBSEQUENT TO THE DATE OF
SUCH INFORMATION. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
----
<S> <C>
Available Information......................................... ii
Reports to Noteholders........................................ iii
Incorporation of Certain Documents by Reference............... iii
Summary of Terms.............................................. S-1
Risk Factors.................................................. S-10
The Trust..................................................... S-12
The Onyx Portfolio of Motor Vehicle Contracts................. S-13
The Contracts................................................. S-15
Maturity And Prepayment Considerations........................ S-17
Yield Considerations.......................................... S-17
Use of Proceeds............................................... S-18
Description of the Notes...................................... S-19
Description of the Transfer and Servicing Agreements.......... S-22
Description of the Insurer.................................... S-25
Erisa Considerations.......................................... S-26
Underwriting.................................................. S-27
Legal Matters................................................. S-27
Experts....................................................... S-27
Index of Terms................................................ S-28
PROSPECTUS
Available Information......................................... iii
Incorporation of Certain Documents by Reference............... iii
Summary of Terms.............................................. 2
Risk Factors.................................................. 6
The Trusts.................................................... 8
The Trustee................................................... 9
The Onyx Portfolio of Motor Vehicle Contracts................. 9
The Contracts................................................. 13
Prefunding Arrangements....................................... 14
Maturity and Prepayment Assumptions........................... 14
Pool Factor and Pool Information.............................. 15
Use of Proceeds............................................... 15
The Seller.................................................... 15
The Servicer.................................................. 16
Description of Securities..................................... 17
Description of the Transfer and Servicing Agreements.......... 21
The Indenture................................................. 30
Certain Legal Aspects of the Contracts........................ 33
Certain Federal Income Tax Consequences....................... 37
Trusts for Which a Partnership Election is Made............... 38
Trusts Treated as Grantor Trusts.............................. 44
Certain State Tax Consequences with Respect
to Trusts For Which a Partnership Election is Made....... 48
Erisa Considerations.......................................... 49
Plan of Distribution.......................................... 50
Legal Opinions................................................ 50
Index Of Terms................................................ 51
</TABLE>
UNTIL ________, 199_ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT) ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$__________
ONYX ACCEPTANCE
OWNER TRUST 199_-_
$_______ ____% AUTO LOAN
BACKED NOTES, CLASS A-1
$_______ ____% AUTO LOAN
BACKED NOTES, CLASS A-2
$_______ ____% AUTO LOAN
BACKED NOTES, CLASS A-3
[ONYX LOGO]
ONYX ACCEPTANCE FINANCIAL CORPORATION,
Seller
ONYX ACCEPTANCE CORPORATION,
Servicer
----------------------------------------
P R O S P E C T U S S U P P L E M E N T
----------------------------------------
[UNDERWRITERS]
[DATE]
================================================================================
<PAGE> 126
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee....................................................... $ 295
Blue Sky Fees and Expenses............................................. **
Printing Expenses...................................................... **
Trustee Fees and Expenses.............................................. **
Legal Fees and Expenses................................................ **
Accounting Fees and Expenses........................................... **
Rating Agencies' Fees.................................................. **
Miscellaneous.......................................................... **
------
Total........................................................ $ **
======
</TABLE>
* All amounts except registration fee are estimates.
** To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law ("DELAWARE
LAW") Onyx Acceptance Financial Corporation (the "COMPANY") has broad powers to
indemnify its directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). The Company's Bylaws (the "BYLAWS") (Exhibit 3.2 hereto)
provide that the Company shall indemnify its directors and officers to the
fullest extent permitted by law and requires the Company to advance litigation
expenses upon receipt by the Company of an undertaking by the director or
officer to repay such advances if it is ultimately determined that the director
is not entitled to indemnification. The Bylaws further provide that rights
conferred under such Bylaws shall not be deemed to be exclusive of any other
right such persons may have or acquire under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
The Certificate of Incorporation (the "CERTIFICATE OF INCORPORATION")
(Exhibit 3.1 hereto) provides that, pursuant to Delaware Law, its directors
shall not be liable for monetary damages for breach of the directors' fiduciary
duty of care to the Company and its stockholders. This provision in the
Certificate of Incorporation does not eliminate the duty of care, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to the Company for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefits to the director, and for payment
of dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Certificate of Incorporation further
provides that the Company shall indemnify its directors and officers to the
fullest extent permitted by law, and requires the Company to advance litigation
expenses in the case of stockholder derivative actions or other actions, against
an undertaking by the director to repay such advances if it is ultimately
determined that the director is not entitled to indemnification. The Certificate
of Incorporation also provides that rights conferred under such Certificate of
Incorporation shall not be deemed to be exclusive of any other right such
persons may have or acquire under any statute, the Certificate of Incorporation,
the Bylaws, agreement, vote of stockholders or disinterested directors, or
otherwise.
The Company has acquired a directors' and officers' liability
insurance policy that, subject to the terms and conditions of the policy,
insures the directors and officers of the Company against losses arising from
any wrongful act (as defined by the policy) in his or her capacity as a director
or officer. The policy reimburses the Company for amounts
II-1
<PAGE> 127
which the Company lawfully indemnifies or for which it is required or permitted
by law to indemnify its directors and officers.
In addition, the Company has entered into agreements to indemnify its
directors and certain of its officers in addition to indemnification provided
for in the Certificate of Incorporation and Bylaws. These agreements will, among
other things, indemnify the Company's directors and certain of its officers for
certain expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by such person in any action or proceeding, including any
action by or in the right of the Company, on account of services as a director
or officer of the Company or as a director or officer of any subsidiary of the
Company, or as a director or officer of any other company or enterprise that the
person provides services to at the request of the Company.
The Underwriting Agreement provides for indemnification by the
Company of the Underwriter, for certain liabilities rising under the Securities
Act or otherwise. It also provides, in certain limited instances, for
indemnification by the Underwriter of the Company with respect to information
furnished by or on behalf of the Underwriter that are contained in this
prospectus or included as part of this Registration Statement.
[Remainder of Page Intentionally Left Blank]
II-2
<PAGE> 128
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
a. Exhibits:
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
4.1 Form of Trust Agreement between the Registrant, the
Servicer and the Owner Trustee
4.2 Form of Indenture between the Trust and the Indenture
Trustee
*4.3 Form of Sale and Servicing Agreement among the
Registrant, the Servicer and the Owner Trustee
4.4 Form of Pooling and Servicing Agreement among the
Registrant, the Servicer and the Trustee
4.5 Form of Administration Agreement among the Trust, the
Administrator and the Indenture Trustee
5.1(a) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Notes
5.1(b) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Certificates
8.1 Opinion of Andrews & Kurth L.L.P. with respect to tax
matters
23.1 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibits 5.1(a) and 5.1(b))
23.2 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibit 8.1)
24.1 Power of Attorney of Directors and Officers of the
Registrant (included on Page II-5).
</TABLE>
- ------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) As to Rule 415:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made of the securities registered
hereby, a post-effective amendment to this registration
statement:
(i) to include any prospectus required
by Section 10(a)(3) of the Securities Act of
1933, as amended;
(ii) to reflect in the prospectus any
facts or events arising after the effective date
of this registration statement (or the most
recent post-effective amendment hereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in this registration statement; and
(iii) to include any material
information with respect to the plan of
distribution not previously disclosed in this
registration statement or any material change to
such information in this registration statement.
Provided, however, that the undertakings set
forth in clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective
amendment by those clauses is contained in periodic
reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934,
as amended, that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, as amended,
each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
II-3
<PAGE> 129
(b) As to documents subsequently filed that are incorporated by
reference:
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, as amended, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended, that is incorporated by reference in this
registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering
of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) As to indemnification:
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irvine,
State of California, on April 28, 1998.
Onyx Acceptance Financial Corporation
By: /s/ JOHN W. HALL
---------------------------------------------
John W. Hall
Director, President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Regan E. Kelly and Don P. Duffy his true and lawful attorney-in-fact
and agent, with full powers of substitution, for him and in his name, place and
stead, in any and all capacities, to sign and to file any and all amendments,
including post-effective amendments, to this Registration Statement with the
Securities and Exchange Commission granting to said attorney-in-fact power and
authority to perform any other act on behalf of the undersigned required to be
done in connection therewith.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN W. HALL President and Chief April 28, 1998
- -------------------------------------- Executive Officer, Director
John W. Hall (Principal Executive Officer)
/s/ DON P. DUFFY Executive Vice President April 28, 1998
- -------------------------------------- and Chief Financial Officer,
Don P. Duffy Director (Principal Financial
and Accounting Officer)
/s/ REGAN E. KELLY Executive Vice President, April 28, 1998
- -------------------------------------- Director
Regan E. Kelly
/s/ KURT C. BICKNELL Director April 28, 1998
- --------------------------------------
Kurt C. Bicknell
/s/ STEVE M. BOND Director April 28, 1998
- --------------------------------------
Steve M. Bond
</TABLE>
II-5
<PAGE> 131
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement
4.1 Form of Trust Agreement between the Registrant, the
Servicer and the Owner Trustee
4.2 Form of Indenture between the Trust and the Indenture
Trustee
*4.3 Form of Sale and Servicing Agreement among the
Registrant, the Servicer and the Owner Trustee
4.4 Form of Pooling and Servicing Agreement among the
Registrant, the Servicer and the Trustee
4.5 Form of Administration Agreement among the Trust, the
Administrator and the Indenture Trustee
5.1(a) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Notes
5.1(b) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Certificates
8.1 Opinion of Andrews & Kurth L.L.P. with respect to tax
matters
23.1 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibits 5.1(a) and 5.1(b))
23.2 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibit 8.1)
24.1 Power of Attorney of Directors and Officers of the
Registrant (included on Page II-5).
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT FOR NOTES AND CERTIFICATES
ONYX ACCEPTANCE [OWNER] [GRANTOR] TRUST 199_-_
$______ CLASS A-1 __% AUTO LOAN [BACKED NOTES] [PASS-THROUGH
CERTIFICATES] $______ CLASS A-2 __% AUTO LOAN [BACKED NOTES]
[PASS-THROUGH CERTIFICATES] $______ CLASS A-3 __% AUTO LOAN [BACKED
NOTES] [PASS-THROUGH CERTIFICATES]
[Date]
[Names of Investment Banks]
As Representatives of the
several Underwriters
c/o [Address]
Dear Sirs:
Section 1. Introductory. Onyx Acceptance Financial Corporation, a
Delaware corporation (the "Seller") and a wholly owned subsidiary of Onyx
Acceptance Corporation, a Delaware corporation ("Onyx"), proposes [to cause Onyx
Acceptance [Owner] [Grantor] Trust 199_-_ (the "Trust"), a business trust
organized under the laws of the State of Delaware,] to sell $_______ aggregate
principal amount of Class A-1 ___% Auto Loan [Backed Notes] [Pass-Through
Certificates] (the "Class A-1 Securities"), $__________ aggregate principal
amount of Class A-2 ____% Auto Loan [Backed Notes] [Pass-Through Certificates]
(the "Class A-2 Securities"), $_______ aggregate principal amount of Class A-3
____% Auto Loan [Backed Notes] [Pass-Through Certificates] (the "Class A-3
Securities", and together with the Class A-1 Securities and the Class A-2
Securities, the "Securities") [of the Onyx Acceptance Grantor Trust 199_-_ (the
"Trust")]. [The Trust will be governed by a [Trust Agreement] [Pooling and
Servicing Agreement] (the "Trust Agreement") to be dated as of _______, 199_
among the Seller, and ________ as owner trustee (the "Owner Trustee")]. The
assets of the Trust will include, among other things, a pool of retail
installment sale contracts (the "Contracts") secured by the new and used
automobiles and/or light duty trucks financed thereunder (the "Financed
Vehicles") and certain monies due or to become due thereunder on or
after________, 199_ (the "Cutoff Date"). The Contracts and other assets of the
Trust will be sold by Onyx to the Seller pursuant to a Sale and Servicing
Agreement (the "Purchase Agreement") dated as of September 8, 1994, as amended
between Onyx and the Seller; [such Contracts and other assets will be sold by
the Seller to the Trust pursuant to a Sale and Servicing Agreement (the "Sale
and Servicing Agreement") to be dated as _________, 199_ among Onyx, the Seller
and the Trust]. As of the Cutoff Date, the Contracts had an aggregate principal
balance of $_______. The Securities will be issued pursuant to the terms of [an
Indenture (the "Indenture") to be dated as of ________, 199_ among the Trust
and________as indenture trustee (the "Indenture Trustee"). Pursuant to the terms
of the Administration Agreement (the "Administration Agreement") to be dated as
of ________, 199_ among Onyx, the Trust and the Indenture Trustee, Onyx will
agree to perform certain administrative functions with respect to the
Securities] [a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") to be dated as of ______, 199_ among the Seller, Onyx, as Servicer
(in such capacity, the "Servicer"), and ________, as trustee (the "Trustee").
The [Trust Agreement,] the Purchase Agreement, [the Sale and Servicing
Agreement, the Indenture and the Administration Agreement] [and the Pooling and
Servicing Agreement], are herein referred to as, the "Basic Documents".
This Underwriting Agreement shall hereinafter be referred to as "this
Agreement". Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Indenture.
<PAGE> 2
Section 2. Representations and Warranties of the Trust, the Seller and
Onyx.
(a) Each of [the Trust], the Seller and Onyx, jointly and severally,
represents and warrants to, and agrees with, each of the Underwriters named in
Schedule I hereto (the "Underwriters") that:
(i) A registration statement on Form S-3 (No. 333-_____),
including a form of prospectus, relating to the Securities has
been filed with the Securities and Exchange Commission (the
"Commission") and either (A) has been declared effective under
the Securities Act of 1933, as amended (the "Act"), and is not
proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration
statement (the "initial registration statement") has been
declared effective, either (i) any additional registration
statement (the "additional registration statement") relating to
the Securities has been filed with the Commission pursuant to
Rule 462(b) ("Rule 462(b)") under the Act and declared effective
upon filing pursuant to Rule 462(b) and the Securities have been
duly registered under the Act pursuant to the initial
registration statement and such additional registration statement
or (ii) any such additional registration statement proposed to be
filed with the Commission pursuant to Rule 462(b) will become
effective upon filing pursuant to Rule 462(b) and upon such
filing the Securities will have been duly registered under the
Act pursuant to the initial registration statement and such
additional registration statement. If the Seller does not propose
to amend the initial registration statement, any such additional
registration statement or any post-effective amendment to either
such registration statement filed with the Commission prior to
the execution and delivery of this Agreement, then the most
recent amendment (if any) to each such registration statement has
been declared effective by the Commission or has become effective
upon filing pursuant to Rule 462(c) under the Act ("Rule 462(c)")
or Rule 462(b).
For purposes of this Agreement, "Effective Time" with
respect to the initial registration statement or, if filed prior
to the execution and delivery of this Agreement, the additional
registration statement means (A) if the Seller has advised the
Representatives that it does not propose to amend such
registration statement, the date and time as of which such
registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and
delivery of this Agreement, was declared effective by the
Commission or has become effective upon filing pursuant to Rule
462(c) or (B) if the Seller has advised the Representatives that
it proposes to file an amendment or post-effective amendment to
such registration statement, the date and time as of which such
registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared
effective by the Commission. If the Seller has advised the
Representatives that it proposes to file, but has not filed, an
additional registration statement prior to the execution and
delivery of this Agreement, "Effective Time" with respect to such
additional registration statement means the date and time as of
which such registration statement is filed and becomes effective
pursuant to Rule 462(b). "Effective Date" with respect to the
initial registration statement or the additional registration
statement (if any) means the date of the Effective Time thereof.
The initial registration statement, as amended at its
Effective Time, including all information (A) contained in the
additional registration statement (if any), (B) deemed to be a
part of the initial registration statement as of the Effective
Time of the additional registration statement (if any) pursuant
to the General Instructions of the Form on which it is filed and
(C) deemed to be a part of the initial registration statement as
of its Effective Time pursuant to Rule 430A(b) under the Act
("Rule 430A(b)"), is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement,
as amended at its Effective Time, including (A) the contents of
the initial registration statement incorporated by reference
therein and (B) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional
Registration Statement". The Initial Registration Statement and
the Additional Registration Statement are
-2-
<PAGE> 3
hereinafter referred to collectively as the "Registration
Statements" and individually as a "Registration Statement". The
form of prospectus relating to the Securities, as first filed
with the Commission pursuant to and in accordance with Rule
424(b) under the Act ("Rule 424(b)") or, if no such filing is
required, as included in a Registration Statement, including all
material incorporated by reference in such prospectus, is
hereinafter referred to as the "Prospectus". [No document has
been or will be prepared or distributed in reliance on Rule 434
under the Act.]
(ii) (A) On the Effective Date of any Registration
Statement whose Effective Time is prior to the execution and
delivery of this Agreement, each such Registration Statement
conformed, (B) on the date of this Agreement each such
Registration Statement conforms and (C) on any related Effective
Date subsequent to the date of this Agreement, each such
Registration Statement will conform, in all material respects
with the requirements of the Act and the rules and regulations of
the Commission promulgated under the Act (the "Rules and
Regulations"), and at such times did not and will not include any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading. At the time of the filing of
the Prospectus pursuant to Rule 424(b) or, if no such filing is
required, at the Effective Date of the Additional Registration
Statement that includes the Prospectus, on the date of this
Agreement and at the Closing Date (as such term is defined in
Section 3 hereof), the Prospectus will conform in all material
respects to the requirements of the Act and the Rules and
Regulations, and does not include, or will not include, any
untrue statement of a material fact, nor does the Prospectus
omit, nor will it omit, any material fact, necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading. The two immediately
preceding sentences do not apply to statements in or omissions
from a Registration Statement or the Prospectus based upon
written information furnished to the Seller by any Underwriter
through o (the "Lead Underwriter") specifically for use therein.
If the Effective Time of the Initial Registration Statement is
subsequent to the date of this Agreement, no Additional
Registration Statement has been or will be filed.
(iii) The consummation of the transactions contemplated by
this Agreement and the Basic Documents, and the fulfillment of
the terms thereof, will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default
under, or result in the creation of any lien, charge, or
encumbrance upon any of the property or assets of [the Trust,]
the Seller or Onyx pursuant to the terms of, any indenture,
mortgage, deed of trust, loan agreement, guarantee, lease
financing agreement or similar agreement or instrument under
which the any of them is a debtor or guarantor.
(iv) No consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required
to be obtained or made by [the Trust,] the Seller or Onyx for the
consummation of the transactions contemplated by this Agreement
except such as have been obtained and made under the Act or the
Rules and Regulations, such as may be required under state
securities laws and filing of any financing statements required
to perfect the transfer of the Contracts.
(v) Neither [the Trust,] the Seller nor Onyx is in
violation of its charter or by-laws or other organizational
documents or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
agreement or instrument to which it is a party or by which it or
its properties are bound which could have a material adverse
effect on the transactions contemplated herein or in the Basic
Documents. The execution, delivery and performance of this
Agreement and the Basic Documents and the issuance and sale of
the Securities and compliance with the terms and provisions of
the Securities will not, subject to obtaining any consents or
approvals as may be required under the state securities laws of
various jurisdictions, result in a breach or violation of any of
the
-3-
<PAGE> 4
terms and provisions of, or constitute a default under, any
statute, rule, regulation or order of any governmental agency or
body or any court having jurisdiction over the Trust, the Seller
or Onyx or any of their respective properties or any agreement or
instrument to which any of them is a party or by which any of
them is bound or to which any of their respective properties is
subject, or with the charter or by-laws or other organizational
documents of [the Trust,] the Seller or Onyx, and each of them
has full corporate power and authority to enter into this
Agreement and the Basic Documents and to consummate the
transactions contemplated hereby and thereby.
(vi) This Agreement has been duly authorized, executed and
delivered by each of the Trust, the Seller and Onyx.
(b) As of the Closing Date, the representations and warranties of [the
Trust,] the Seller and of Onyx in the Basic Documents will be true and correct,
and the Underwriters may rely on such representations and warranties as if they
were set forth herein in full.
Section 3. Purchase, Sale and Delivery of the Securities. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the [Trust] [Seller] agrees to
sell to the Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the [Trust] [Seller], the respective principal amounts of
Securities set forth opposite the names of the Underwriters in Schedule I
hereto. The Securities are to be purchased at a purchase price equal to (i) in
the case of the Class A-1 Securities, ____% of the aggregate principal amount
thereof plus accrued interest at the Class A-1 Rate from (and including)
________, 199_, to (but excluding) the Closing Date (ii) in the case of the
Class A-2 Securities, ____% of the aggregate principal amount thereof plus
accrued interest at the Class A-2 Rate from (and including) _______, 199_, to
(but excluding) the Closing Date, and (iii) in the case of the Class A-3
Securities, ___% of the aggregate principal amount thereof plus accrued interest
at the Class A-3 Rate from (and including) ________, 199_, to (but excluding)
the Closing Date.
The Securities will initially be represented by (i) in the case of the
Class A-1 Securities, ______ certificates representing $________ aggregate
principal amount of Class A-1 Securities registered in the name of Cede & Co.,
the nominee of The Depository Trust Company, New York, New York ("DTC") (the
"Class A-1 DTC Securities"), and one fully registered certificate representing
$________ aggregate principal amount of Class A-1 Securities registered in the
name of the [Trust] [Seller], (ii) in the case of the Class A-2 Securities,
_____ certificates representing $________ aggregate principal amount of Class
A-2 Securities registered in the name of DTC (the "Class A-2 DTC Securities"),
and one fully registered certificate representing $________ aggregate principal
amount of Class A-2 Securities registered in the name of the [Trust,] [Seller]
and (iii) in the case of the Class A-3 Securities,________certificates
representing $________ aggregate principal amount of Class A-3 Securities
registered in the name of DTC (the "Class A-3 DTC Securities", and together with
the Class A-1 DTC Securities and the Class A-2 DTC Securities, the "DTC
Securities"), and one fully registered certificate representing $________
aggregate principal amount of Class A-3 Securities registered in the name of the
[Trust] [Seller]. The interests of beneficial owners of the DTC Securities will
be represented by book entries on the records of DTC and participating members
thereof. Definitive certificates evidencing the Securities will be available
only under the limited circumstances specified in the Prospectus.
The Trust will deliver the DTC Securities to the Representatives for the
respective securities accounts of the Underwriters at the office of DTC, 55
Water Street, 49th Floor, New York, New York 10004, against payment to the
[Trust] [Seller] of the purchase price for the Securities by wire transfer in
immediately available funds, at 10:00 A.M., New York time, on ______, 199_, or
at such other time not later than seven full business days thereafter as the
Trust, the Seller, Onyx and the Representatives determine, such time being
herein referred to as the "Closing Date". The certificates evidencing the DTC
Securities will be made available for checking and packaging at the office
of________in The City of New York at least 24 hours prior to the Closing Date.
-4-
<PAGE> 5
Section 4. Offering by the Underwriters. It is understood that the
several Underwriters propose to offer the Securities for sale to the public as
set forth in the Prospectus.
Section 5. Certain Agreements of the Seller and Onyx. Each of the Seller
and Onyx, as the case may be, jointly and severally, covenants and agrees with
the several Underwriters that:
(a) If the Effective Time is prior to the execution and delivery of this
Agreement, the Seller will file the Prospectus with the Commission pursuant to
and in accordance with Rule 424(b)(1) (or, if applicable and if consented to by
the Underwriter, Rule 424(b)(4)) not later than the earlier of (i) the second
business day following the execution and delivery of this Agreement or (ii) the
fifteenth business day after the Effective Date of the Initial Registration
Statement. The Seller will advise the Underwriter promptly of any such filing
pursuant to Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and an
additional registration statement is necessary to register a portion of the
Securities under the Act but the Effective Time thereof has not occurred as of
such execution and delivery, the Seller will file the Additional Registration
Statement or a post-effective amendment thereto, as the case may be, with the
Commission pursuant to and in accordance with Rule 424(b) on or prior to 10:00
P.M., New York time, on the date of this Agreement or, if earlier, on or prior
to the time the Prospectus is printed and distributed to any Underwriter, or
will make such filing at such later date as shall have been consented to by the
Underwriter.
(b) The Seller will advise the Representatives promptly of any proposal
to amend or supplement the initial registration statement or any additional
registration statement as filed or the related prospectus or any Registration
Statement or the Prospectus and will not effect any such amendment or supplement
without the consent of the Representatives; and the Seller will also advise the
Representatives promptly of the effectiveness of each Registration Statement (if
the related Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplement of any Registration Statement or
the Prospectus and of the institution by the Commission of any stop order
proceedings in respect of any Registration Statement and will use its best
efforts to prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act, the Seller will promptly notify the
Representatives and will promptly prepare and file, or cause to be prepared and
filed, with the Commission an amendment or supplement which will correct such
statement or omission, or an amendment or supplement which will effect such
compliance. Neither the Representatives' consent to, nor the delivery by the
Representatives of, any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 6 hereof.
(d) As soon as practicable, but not later than the Availability Date (as
defined below), the [Trust] [Seller] will cause the [Indenture] Trustee to make
generally available to the holders of the Securities an earnings statement with
respect to the Trust covering a period of at least 12 months beginning after the
Effective Date of the Initial Registration Statement (or of any Additional
Registration Statement) that will satisfy the provisions of Section 11(a) of the
Act. For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the Seller's fourth fiscal quarter following the
Seller's fiscal quarter that includes such Effective Date, except that, if such
fourth fiscal quarter is the last quarter of the Seller's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Seller will furnish to the Underwriters copies of each
Registration Statement as originally filed and each amendment thereto (in each
case at least two of which will be signed and will include all exhibits), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Representatives may reasonably
-5-
<PAGE> 6
request. The Prospectus shall be so furnished no later than 3:00 P.M., New York
City time, on the second business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial Registration
Statement. All other documents shall be furnished as soon as available. The
Seller will pay the expenses of printing and distributing to the Underwriters
all such documents.
(f) The Seller will arrange for the qualification of the Securities for
sale under the securities laws of such jurisdictions in the United States as the
Representatives may reasonably designate and will continue such qualifications
in effect so long as required for the distribution of the Securities, provided
that the Seller shall not be obligated to qualify to do business nor become
subject to service of process generally, but only to the extent required for
such qualification, in any jurisdiction in which it is not currently so
qualified.
(g) So long as any of the Securities are outstanding, [the Trust,] the
Seller or Onyx, as the case may be, will deliver or cause to be delivered to the
Representatives (i) copies of each report regarding the Securities mailed to
holders pursuant to [Section 5.09 of the Sale and Servicing Agreement] [Section
4.10 of the Pooling and Servicing Agreement], (ii) the annual statement as to
compliance and the annual statement of a firm of independent public accountants
furnished to the [Owner] Trustee pursuant to [Sections 4.10 and 4.11 of the Sale
and Servicing Agreement (as amended)] [Sections 3.11 and 3.12 of the Pooling and
Servicing Agreement (as amended)], as soon as such statements are furnished to
the [Owner] Trustee, (iii) the reports, if any, prepared and delivered by the
Trust and the Indenture Trustee pursuant to Sections 7.03 and 7.04 of the
Indenture,] (iv) copies of all documents required to be filed with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any order of the Commission thereunder and (v) such other
information concerning the Seller, Onyx (relating to the Contracts, the
servicing thereof or the ability of Onyx to act as Servicer), the Securities or
the Trust as the Representatives may reasonably request from time to time.
(h) The [Trust, the ]Seller and Onyx will pay all expenses incident to
the performance of their respective obligations under this Agreement, including
without limitation, (i) expenses incident to the printing, reproduction and
distribution of the Registration Statement as originally filed and each
amendment thereto, preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto), (ii) the fees and disbursements of the
[Owner] Trustee [and the Indenture Trustee] and [its] [their] respective
counsel, (iii) the fees and disbursements of counsel to [the Trust], the Seller
and Onyx and the independent public accountants of the Seller, (iv) the fees
charged by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Services ("Standard & Poor's", and together with Moody's, the "Rating
Agencies") in connection with the rating of the Securities, (v) the fees of DTC
in connection with the book-entry registration of the DTC Securities and (vi)
expenses incurred in distributing preliminary prospectuses and the Prospectus
(including any amendments and supplements thereto) to the Underwriters, and will
reimburse the Underwriters for any expenses (including reasonable fees and
disbursements of counsel) incurred by the Underwriters in connection with the
qualification of the Securities for sale under the securities laws of such
jurisdictions in the United States as the Representatives may designate pursuant
to Section 5(f) hereof.
(i) On or before the Closing Date, the Seller and Onyx shall cause their
respective books and records (including any computer records) relating to the
Contracts to be marked to show the Trust's absolute ownership of the Contracts,
and from and after the Closing Date neither the Seller nor Onyx, as Servicer,
shall take any action inconsistent with the Trust's ownership of such Contracts,
other than as permitted by [the Indenture or the Sale and Servicing Agreement]
[Pooling and Servicing Agreement] or as required by law.
(j) For a period of 14 days from the date hereof, none of [the Trust,]
the Seller, Onyx nor any of their respective affiliates will, without the prior
written consent of the Representatives, directly or indirectly, offer, sell or
contract to sell or announce the offering of, in a public or private transaction
in the United States, any other collateralized securities similar to the
Securities.
(k) So long as any Securities are outstanding, [the Trust,] the Seller
and Onyx will cause to be delivered to the Representatives a reliance letter
relating to each Opinion of Counsel delivered to either Rating Agency by counsel
to [the Trust,] the Seller or Onyx pursuant to any Basic Document.
-6-
<PAGE> 7
(l) To the extent, if any, that the rating at the Closing Date provided
with respect to the Securities by either Rating Agency is conditional upon the
furnishing of documents or the taking of any other actions by the Seller or
Onyx, the Seller or Onyx, as the case may be, shall furnish such documents and
take any such other actions as may be required.
Section 6. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for any of the
Securities will be subject to the accuracy of the respective representations and
warranties on the part of [the Trust,] the Seller and Onyx herein, to the
accuracy of the statements of [the Trust,] the Seller and Onyx made in any
officers' certificates pursuant to the provisions hereof, to the performance by
[the Trust,] the Seller and Onyx of their respective obligations hereunder and
to the following additional conditions precedent:
(a) On (i) the date of this Agreement, the Representatives, [the Trust]
and the Seller shall have received a letter, dated the date of delivery thereof
(which, if the Effective Time of the Initial Registration Statement is prior to
the execution and delivery of this Agreement, shall be on or prior to the date
of this Agreement or, if such Effective Time is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment or
post-effective amendment to the registration statement to be filed shortly prior
to such Effective Time), of Price Waterhouse LLP confirming that they are
independent public accountants with respect to the Seller and Onyx within the
meaning of the Act and the Rules and Regulations, with respect to certain
information contained in the Registration Statements and substantially in the
form of the draft to which the Representatives previously have agreed and
otherwise in form and in substance satisfactory to the Representatives and
counsel for the Underwriters and (ii) the Closing Date, the Representatives,
[the Trust] and the Seller shall have received a letter, dated as of the Closing
Date, from Price Waterhouse LLP, updating the letter referred to in clause (i)
above, in form and substance satisfactory to the Representatives and counsel for
the Underwriters. As used in this subsection, (i) "Registration Statements"
shall mean (A) the Initial Registration Statement as proposed to be amended by
the amendment or post-effective amendment to be filed shortly prior to its
Effective Time, if the Effective Time of the Initial Registration Statement is
subsequent to the date of this Agreement, or (B) the Initial Registration
Statement and the additional registration statement as proposed to be filed or
as proposed to be amended by the post-effective amendment to be filed shortly
prior to its Effective Time, if the Effective Time is prior to the execution and
delivery of this Agreement but the Effective Time of the Additional Registration
Statement is subsequent to such execution and delivery, and (ii) "Prospectus"
shall mean the prospectus included in the Registration Statements.
(b) If the Effective Time of the Initial Registration Statement is not
prior to the execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of this
Agreement or such later date as shall have been consented to by the
Representatives. If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Prospectus shall have
been filed with the Commission in accordance with the Rules and Regulations and
Section 5(a) hereof. If the Effective Time of the Additional Registration
Statement (if any) is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, the time the Prospectus is
printed and distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by the Underwriter. Prior to the Closing
Date, no stop order suspending the effectiveness of any Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Seller or the Representatives, shall be
contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any material adverse change in the condition,
financial or otherwise, or in the business affairs or business prospects of [the
Trust,] the Seller or Onyx which, in the reasonable judgment of a majority in
interest of the Underwriters including the Representatives, materially impairs
the investment quality of any of the Securities, or makes it impractical or
inadvisable to proceed with completion of the sale of and payment for any of the
Securities; (ii) any downgrading in the rating of any debt securities of Onyx or
any of its direct or indirect
-7-
<PAGE> 8
subsidiaries by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating of any
such debt securities (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating); (iii) any suspension or limitation of trading in securities generally
on the New York Stock Exchange or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of Onyx on any
exchange or in the over-the-counter market; (iv) any banking moratorium declared
by federal, California or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by the United States Congress or any other substantial
national or international calamity or emergency if, in the reasonable judgment
of a majority in interest of the Underwriters including the Representatives, the
effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale of
and payment for any of the Securities.
(d) The Representatives shall have received:
(1) The favorable opinion, dated the Closing Date, of Andrews &
Kurth L.L.P., special counsel for [the Trust,] the Seller and Onyx, in
form and scope satisfactory to the Representatives, to the effect that:
(i) Each Basic Document has been duly authorized by all
necessary corporate action on the part of each of [the Trust,]
the Seller and Onyx, as the case may be, and has been executed
and delivered by each of [the Trust,] the Seller and Onyx, as the
case may be, and, assuming the due authorization, execution and
delivery thereof by the other parties thereto, constitutes a
legally valid and binding obligation of each of [the Trust,] the
Seller and Onyx, as the case may be, enforceable in accordance
with its respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws). Such counsel may state,
however, that enforceability of the Basic Documents is subject to
the effect of general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law.
(ii) The Securities have been duly and validly authorized
and, when executed and authenticated [by the Indenture Trustee as
specified in the Indenture,] [by the Trustee as specified in the
Pooling and Servicing Agreement] and delivered to the
Representatives for the respective accounts of the Underwriters
against payment of the consideration specified herein, will be
duly and validly issued and outstanding and entitled to the
benefits of [the Indenture] [the Pooling and Servicing
Agreement], except as the enforceability of the [Indenture]
[Pooling and Servicing Agreement] may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws), and general principles
of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific enforcement or injunctive
relief, regardless of whether considered in a proceeding in
equity or at law.
(iii) Neither the Seller nor the Trust is required to be
registered under the Investment Company Act.
(iv) With respect to Financed Vehicles in the State of
California, no filing or other action other than (A) the filing
of a UCC financing statement naming Onyx as transferor and the
Seller as the transferee, and (B) the filing of a UCC financing
statement naming the Seller as the transferor and the [Owner]
Trustee as transferee [and the filing of a UCC filing statement
naming the Owner Trustee as the transferor and the Indenture
Trustee as the
-8-
<PAGE> 9
transferee], which filings have been completed, is necessary to
perfect the transfer and assignment of Onyx's security interest
in such Financed Vehicles to the Seller, and the Seller's
security interest in such Financed Vehicles to the [Owner]
Trustee, [and the Owner Trustee's security interest in such
Financed Vehicles to the Indenture Trustee, respectively,] and as
a result of such transfer and assignment and filing of such
financing statements, the [Indenture] Trustee has a first
perfected security interest in such Financed Vehicles, except
that so long as Onyx is named as the legal owner and lien holder
on a certificate of title, Onyx has the ability to release the
security interest in the Financed Vehicle or to assign it to
another party.
(v) The Trust will not be classified as an association (or
a publicly traded partnership) taxable as a corporation for
federal or California income tax purposes.
(vi) The statements in the Prospectus under "Summary--Tax
Status" and "-- ERISA Considerations", "Certain Federal Income
Tax Considerations" and "ERISA Considerations", to the extent
that they constitute matters of law or legal conclusions with
respect thereto, have been reviewed by such counsel and are
correct in all material respects.
(vii) This Agreement and each Basic Document has been duly
authorized by all necessary corporate action on the part of each
of [the Trust], the Seller and Onyx, as the case may be, and has
been duly executed and delivered by each of them.
(viii) No authorization, approval, consent or order of any
court or governmental agency or body is required, under the
Federal law of the United States or the laws of the State of
California or the State of New York, for the consummation by any
of [the Trust,] the Seller or Onyx of the transactions
contemplated in this Agreement or the Basic Documents except such
as may be required under the Act, the Rules and Regulations or
state securities laws, and those authorizations, approvals,
consents, orders and filings which have previously been obtained
or made and are in full force and effect as of the Closing Date;
provided, that such counsel need express no opinion as to state
securities laws.
(ix) To such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened, to which
[the Trust,] the Seller or Onyx is a party or of which any
property of [the Trust,] the Seller or Onyx is the subject
required to be disclosed in the Registration Statements, other
than those disclosed therein, (A) asserting the invalidity of
this Agreement, any Basic Document or the Securities, (B) seeking
to prevent the issuance of the Securities or the consummation of
any of the transactions contemplated by this Agreement or the
Basic Documents, (C) that would, if determined adversely to [the
Trust,] Onyx or the Seller, materially and adversely affect the
performance by [the Trust,] the Seller or Onyx of their
respective obligations under, or the validity or enforceability
of, this Agreement, either Basic Document or the Securities or
(D) seeking adversely to affect the federal income tax attributes
of the Securities as described in the Prospectus under the
heading "Certain Federal Income Tax Considerations" or the
California income tax attributes of the Securities.
(x) At the time of execution and delivery of (A) the
Purchase Agreement, Onyx had the corporate power and corporate
authority to transfer the Contracts and such other property being
transferred to the Seller pursuant to the Purchase Agreement, (B)
the [Pooling] [Sale] and Servicing Agreement, the Seller had the
corporate power and corporate authority to transfer the Contracts
and such other property being transferred to the Owner Trustee
pursuant to the Pooling and Servicing Agreement, and (C) the
Indenture, the Owner Trustee had the corporate power and
corporate authority to transfer the interests in the Contracts
and such other property being transferred to the Indenture
Trustee pursuant to the Indenture and to cause the transfer of
the Securities to the Underwriters.
-9-
<PAGE> 10
(xi) The Securities and the Basic Documents each conform
in all material respects with the respective descriptions thereof
contained in the Registration Statements and the Prospectus.
(xii) The statements in the Registration Statements and
Prospectus under the heading "Certain Legal Aspects of the
Contracts", to the extent that they constitute matters of law or
legal conclusions are correct in all material respects.
(xiii) The [Pooling] [Sale] and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of 1939,
as amended (the "1939 Act"); the Indenture has been duly
qualified under the 1939 Act.
(xiv) The Contracts constitute "chattel paper" as such
term is defined in the California Uniform Commercial Code.
(xv) The Initial Registration Statement and any Additional
Registration Statement filed with the Commission has been
declared effective under the Act, and, to such counsel's
knowledge upon due inquiry, no stop order suspending the
effectiveness of a Registration Statement has been issued under
the Act or proceedings therefor initiated or threatened by the
Commission, and each Registration Statement and the Prospectus,
and each amendment or supplement thereto, as of its respective
effective or issue date, complied or complies in all material
respects with the requirements as to form of the Act and the
Rules and Regulations.
In addition, such counsel shall state that such counsel has participated
in conferences with the officers and other representatives of [the Trust,] Onyx
and the Seller, representatives of the independent public accountants therefor
and the Underwriters, at which the contents of the Registration Statement and
the Prospectus and related matters were discussed and, although such counsel is
not passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained therein and have not made
any independent check or verification thereof, during the course of such
participation (relying as to factual matters as to materiality to a large extent
upon the statements of officers and other representatives of [the Trust,] Onyx
and the Seller), such counsel does not believe that any Registration Statement,
at the related Effective Time, or any such amendment or supplement, as of its
effective date, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, at the date of this
Agreement (or any such amendment or supplement, as of its respective date) or at
the Closing Date included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; it being understood that such counsel need express no
opinion as to the Form T-1 filed as an exhibit to the Registration Statement or
any financial statements or other financial or statistical data contained in any
Registration Statement or the Prospectus.
(2) The favorable opinion, dated the Closing Date, of Alan F.
Cohen, Esq., General Counsel of Onyx, and counsel to the Trust and the
Seller, in form and substance scope to the Representatives and their
counsel, to the effect that:
(i) Each of the Seller and Onyx is a corporation duly
organized, existing and in good standing under the laws of the
State of Delaware.
(ii) To such counsel's knowledge, each of the Seller and
Onyx is duly incorporated or qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction
in which their respective ownership or lease of substantial
properties or the conduct of their respective businesses requires
such qualification and in which the failure
-10-
<PAGE> 11
to so qualify and be in good standing would materially adversely
affect their respective businesses or financial condition.
(iii) To such counsel's knowledge (A) there are no legal
or governmental proceedings pending or threatened which are
required to be disclosed in the Registration Statements, other
than those disclosed therein, (B) there are no legal or
governmental proceedings to which Onyx is a party or to which any
of its property is subject which are not described in Onyx's
Annual Report on Form 10-K for the year ended o, or its Quarterly
Reports for the quarters ended _____, 199_, _____, 199_, and
_____, 199_, which are required to be disclosed therein other
than those disclosed therein and (C) there are no pending legal
or governmental proceedings to which the Seller is a party or to
which any of its property is subject.
(iv) To such counsel's knowledge (A) no default exists in
the due performance or observance by Onyx of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it may be bound,
which default would have a material adverse effect on the
financial condition, earnings, business affairs, business
prospects, properties or results of operations of Onyx and its
subsidiaries considered as one enterprise, and (B) other than
this Agreement and the Basic Documents, the Seller is not a party
to any material contract, indenture, mortgage, loan agreement,
note, lease or other instrument.
(v) The transfer of the Contracts and the other property
of the Trust transferred by Onyx to the Seller pursuant to the
Purchase Agreement, the execution, delivery and performance of
the Basic Documents and this Agreement and the consummation of
the transactions herein and therein contemplated will not (A)
conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any Lien upon any
property or assets of Onyx or any of its subsidiaries pursuant
to, any material contract, indenture, mortgage, loan agreement,
note, lease or other instrument known to such counsel to which
Onyx or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets
of Onyx or any of its subsidiaries is subject, (B) result in any
violation of the provisions of the charter or bylaws of Onyx or
(C) to such counsel's knowledge, result in any violation of any
applicable law, administrative regulation or administrative or
court decree.
(vi) The transfer of the Contracts to the [Owner] Trustee
acting on behalf of the Trust, the assignment of the security
interest of the Seller in the Financed Vehicles, and the
execution and delivery of this Agreement and the Basic Documents,
and the consummation of the transactions contemplated herein and
therein will not (A) conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any
Lien upon any property or assets of the Seller pursuant to, any
material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Seller is a party or by
which it may be bound, or to which any of the property or assets
of the Seller is subject, (B) result in any violation of the
provisions of the charter or bylaws of the Seller or (C) to such
counsel's knowledge, result in any violation of any applicable
law, administrative regulation or administrative or court decree.
(vii) Each of the Seller and Onyx has obtained all
necessary licenses and approvals under the federal law of the
United States and the laws of the State of California to conduct
their respective businesses in which the failure to obtain such
licenses and approvals would render any Receivable or any other
material part of the corpus of the Trust unenforceable or would
materially and adversely affect the ability of any of [the
Trust,] the Seller or Onyx to perform any of their respective
obligations under, or the enforceability of, any Basic Document.
-11-
<PAGE> 12
(viii) Such counsel is familiar with the standard
operating procedures of Onyx relating to the acquisition by Onyx
of a first perfected security interest in the automobiles or
light duty trucks financed by the retail installment sale
contracts purchased by Onyx in the ordinary course of its
business and relating to the sale to Onyx of such contracts and
such security interests in the automobiles or light duty trucks
financed thereby in the ordinary course of its business. Assuming
that such standard procedures are followed with respect to the
perfection of security interests in the Financed Vehicles (and
such counsel has no reason to believe that Onyx has not or will
not continue to follow its standard procedures in connection with
the perfection of first perfected security interests in the
Financed Vehicles), Onyx has acquired a first perfected security
interest in the Financed Vehicles.
(3) [The favorable opinion, dated the Closing Date, of _________,
special Delaware counsel to the Trust, in form and scope satisfactory to
the Representatives and their counsel, to the effect that
(i) The trust is duly organized, existing and in good
standing as a Delaware business trust under the laws of the State
of Delaware.
(ii) The transfer of the Contracts to the Indenture
Trustee pursuant to the terms of the Indenture, the assignment of
the security interest of the Trust in the Financed Vehicles, the
issuance and sale of the Securities, and the execution and
delivery of this Agreement, the Basic Documents and the
Securities, and the consummation of the transactions contemplated
herein and therein will not (A) conflict with or constitute a
breach of, or default under, or result in the creation or
imposition of any Lien upon any property or assets of the Trust
pursuant to, any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Seller is
a party or by which it may be bound, or to which any of the
property or assets of the Trust is subject, (B) result in any
violation of the provisions of the Trust Agreement or other
organizational documents of the Seller or (C) to such counsel's
knowledge, result in any violation of any applicable law,
administrative regulation or administrative or court decree.]
(4) The favorable opinion, dated the Closing Date, of _________,
special [name of state] counsel to [the Trust,] the Seller and Onyx, in
form and scope satisfactory to the Representatives and their counsel, to
the effect that the blank forms of Contracts identified and reviewed by
them and attached to such opinion comply, or complied when in use, with
all applicable provisions of the law of such state and the regulations
promulgated thereunder regarding retail installment sales of motor
vehicles.
(5) The favorable opinion, dated the Closing Date, of ________,
special [name of state] counsel to the Seller and Onyx, in form and
scope satisfactory to the Representatives and their counsel, to the
effect that, assuming the due authorization, execution and delivery
thereof by the parties thereto, each of the Contracts in the form
attached to such opinion constitutes the valid, binding and enforceable
agreement of the parties thereto; and such Contracts comply as to
content and form with all applicable state laws and federal disclosure
laws relating to consumer credit, including without limitation, consumer
protection laws.
(6) Reliance letters relating to each opinion rendered to either
Rating Agency by (A) Andrews & Kurth L.L.P and (B) ____________.
(7) The favorable opinion, dated the Closing Date, of counsel to
the [Indenture] Trustee, in form and scope satisfactory to the
Representatives and counsel for the Underwriters, to the effect that:
-12-
<PAGE> 13
(i) The [Indenture] Trustee is a New York banking
corporation duly organized and validly existing under the laws of
the State of New York, and is duly authorized and empowered to
exercise trust powers under applicable law.
(ii) The [Indenture] Trustee has full power and authority
to execute, deliver and perform its obligations under the
[Indenture and the Administration] [Pooling and Servicing]
Agreement and has taken all necessary action to authorize the
execution, delivery and performance of its obligations
thereunder.
(iii) The [Indenture and Administration Agreement have
each] [Pooling and Servicing Agreement has] been duly authorized,
executed and delivered by the [Indenture] Trustee, and
constitutes a legal, valid and binding obligation of the
[Indenture] Trustee, enforceable against the [Indenture] Trustee
in accordance with its terms, except that certain of such
obligations may be exercisable solely against the estate of the
Trust and except that such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, liquidation
or other similar laws applicable to New York banking corporations
affecting the enforcement of creditors' rights generally, and by
general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair
dealing (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(iv) The Securities have been duly executed, authenticated
and delivered by the [Indenture] Trustee in accordance with the
terms of the [Indenture] [Pooling and Servicing Agreement].
(v) The execution, delivery and performance by the
[Indenture] Trustee of the [Indenture and the Administration
Agreement] [Pooling and Servicing Agreement] shall not (a)
violate any provision of any law governing the banking or trust
powers of the [Indenture] Trustee or, to the best knowledge of
such counsel, any order, writ, judgment or decree of any court,
arbitrator or governmental authority applicable to the
[Indenture] Trustee or any of its assets, (b) shall not violate
any provision of the corporate charter or by-laws of the
[Indenture] Trustee and (c) to the best of such counsel's
knowledge, violate any material provision of, constitute, with or
without notice or lapse of time, a material default under, or
result in the creation or imposition of any lien on any
properties of the Trust pursuant to the provisions of any
mortgage, indenture, contract, agreement or other undertaking to
which the [Indenture] Trustee is a party.
(vi) The execution, delivery and performance by the
[Indenture] Trustee of [each of the Indenture and the
Administration Agreement] [the Pooling and Servicing Agreement]
shall not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with or the
taking of any other action in respect of, any governmental
authority or agency regulating the banking or corporate trust
activities of the [Indenture] Trustee.
(8) [The favorable opinion, dated the Closing Date, of counsel to
the Owner Trustee, in form and scope satisfactory to the Representatives
and counsel for the Underwriters, to the effect that:
(i) The Owner Trustee is a________duly organized and
validly existing under the laws of ___________, and is duly
authorized and empowered to exercise trust powers under
applicable law.
(ii) The Owner Trustee has full power and authority to
execute, deliver and perform its obligations under the Trust
Agreement and has taken all necessary action to authorize the
execution, delivery and performance of its obligations under the
Trust Agreement.
-13-
<PAGE> 14
(iii) The Trust Agreement has been duly authorized,
executed and delivered by the Owner Trustee, and constitutes a
legal, valid and binding obligation of the Owner Trustee,
enforceable against the Owner Trustee in accordance with its
terms, except that certain of such obligations may be exercisable
solely against the estate of the Trust and except that such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, liquidation or other similar laws
applicable to________affecting the enforcement of creditors'
rights generally, and by general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(iv) The execution, delivery and performance by the Owner
Trustee of the Trust Agreement shall not (a) violate any
provision of any law governing the banking or trust powers of the
Owner Trustee or, to the best knowledge of such counsel, any
order, writ, judgment or decree of any court, arbitrator or
governmental authority applicable to the Owner Trustee or any of
its assets, (b) shall not violate any provision of the corporate
charter or by-laws of the Owner Trustee and (c) to the best of
such counsel's knowledge, violate any material provision of,
constitute, with or without notice or lapse of time, a material
default under, or result in the creation or imposition of any
lien on any properties of the Trust pursuant to the provisions of
any mortgage, indenture, contract, agreement or other undertaking
to which the Owner Trustee is a party.
(v) The execution, delivery and performance by the Owner
Trustee of the Trust Agreement shall not require the
authorization, consent or approval of, the giving of notice to,
the filing or registration with or the taking of any other action
in respect of, any governmental authority or agency regulating
the banking or corporate trust activities of the Owner Trustee.
(9) The favorable opinion of Andrews & Kurth L.L.P., counsel for
the Underwriters, dated the Closing Date, with respect to the existence
of [the Trust,] the Seller and Onyx, the validity of the Securities and
such other related matters as the Representatives shall request and [the
Trust,] the Seller and Onyx shall have furnished or caused to be
furnished to such counsel such documents as they may reasonably request
for the purpose of enabling them to pass upon such matters.
(e) The Representatives shall have received a certificate, dated the
Closing Date, signed by the President or any Vice President and a principal
financial or accounting officer of (i) the Seller in which such officers shall
state that, (A) to the best of their knowledge after reasonable investigation,
the representations and warranties of the Seller in this Agreement are true and
correct, (B) the Seller has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, (C) no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of their knowledge, are contemplated by the
Commission, (D) the Additional Registration Statement, if any, satisfying the
requirements of Rule 462(b)(1) and Rule 462(b)(3) was filed in accordance with
Rule 462(b) (including payment of the applicable filing fee in accordance with
Rule 111(a) or Rule 111(b) under the Act) prior to the time the Prospectus was
printed or distributed to the Underwriter and (E) subsequent to the date of this
Agreement, there has been no material adverse change in the condition, financial
or otherwise, or in the business affairs or business prospects of the Seller
except as set forth or contemplated in the Prospectus,(ii) Onyx in which such
officers shall state that, to the best of their knowledge after reasonable
investigation, the representations and warranties of Onyx in this Agreement are
true and correct, that Onyx has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder and that
subsequent to the date of this Agreement there has been no material adverse
change in the condition, financial or otherwise, or in the business affairs or
business prospects of Onyx which would materially and adversely affect the
performance by Onyx of its obligations under this Agreement or the Basic
Documents[, and (iii) the Trust in which such officers shall state that, to the
best of their knowledge after reasonable investigation, the representations and
warranties of the Trust in this Agreement are true and correct, that the Trust
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder and that subsequent to the date of this
Agreement there has
-14-
<PAGE> 15
been no material adverse change in the condition, financial or otherwise, or in
the business affairs or business prospects of the Trust which would materially
and adversely affect the performance by the Trust of its obligations under this
Agreement or the Basic Documents.]
(f) The Class A-1 Securities shall be rated "___" by Moody's and "___"
by Standard & Poor's.
(g) The Class A-2 Securities shall be rated at least "___" by Moody's
and at least "___" by Standard & Poor's.
(h) The Class A-3 Securities shall be rated at least "___" by Moody's
and at least "____" by Standard & Poor's.
Section 7. Indemnification and Contribution.
(a) The [Trust, the] Seller and Onyx will, jointly and severally,
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that none of [the Trust,] the Seller nor Onyx will be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
in or omission or alleged omission from any of such documents in reliance upon
and in conformity with written information furnished to the Seller by any
Underwriter through the Lead Underwriter specifically for use therein.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless each of [the Trust,] the Seller and Onyx against any losses, claims,
damages or liabilities to which the Seller or Onyx may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Seller by any Underwriter
through the Lead Underwriter specifically for use therein, and will reimburse
any legal or other expenses reasonably incurred by [the Trust,] the Seller and
Onyx in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified
-15-
<PAGE> 16
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by [the Trust,] the
Seller and Onyx on the one hand and the Underwriters on the other from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of [the Trust,] the Seller and Onyx on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities as well as any
other relevant equitable considerations. The relative benefits received by [the
Trust,] the Seller and Onyx on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the [Trust] [Seller] bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by [the Trust,] the Seller or Onyx or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Certificates underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of [the Trust,] the Seller and Onyx under this
Section shall be in addition to any liability that [the Trust,] the Seller or
Onyx may otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter within the meaning of the Act;
and the obligations of the Underwriters under this Section shall be in addition
to any liability that the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each director of the Seller, to
each officer of the Seller who has signed any Registration Statement and to each
person, if any, who controls [the Trust,] the Seller or Onyx within the meaning
of the Act.
Section 8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase any Securities hereunder and the
aggregate principal amount of the Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
principal amount of the Securities, the Representatives may make arrangements
satisfactory to [the Trust,] the Seller and Onyx for the purchase of such
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, the non-defaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Securities that such defaulting Underwriters agreed but failed
to purchase. If any Underwriter or Underwriters so default and the aggregate
principal amount of the Securities with respect to which such default or
defaults occur exceeds 10% of the total principal amount of the Securities and
arrangements satisfactory to [the Trust,] the Seller and Onyx for the purchase
of such Securities by other persons are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, [the Trust,] the Seller or Onyx, except as provided
in Section 9 hereof. As used in this Agreement, the term "Underwriter" includes
any
-16-
<PAGE> 17
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
Section 9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of [the Trust,] the Seller and Onyx or their respective officers and
of the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation or statement as
to the results thereof, made by or on behalf of any Underwriter, [the Trust,]
the Seller, Onyx or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Securities. If this Agreement is terminated pursuant to Section 8 hereof
or if for any reason the purchase of the Securities by the Underwriters is not
consummated, [the Trust,] the Seller and Onyx shall remain responsible for the
expenses to be paid or reimbursed by [the Trust,] the Seller and Onyx pursuant
to Section 5(h) hereof and the respective obligations of [the Trust,] the
Seller, Onyx and the Underwriters pursuant to Section 7 hereof shall remain in
effect. If the purchase of the Securities by the Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 hereof or the occurrence of any event specified in clause
(iii), (iv) or (v) of Section 6(c) hereof, [the Trust,] the Seller and Onyx will
reimburse the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by it in connection with the
offering of the Securities.
Section 10. Notices. All communications hereunder will be in writing
and, if sent to the Representatives or the Underwriters, will be mailed,
delivered or telegraphed and confirmed to the Representatives c/o ___________,
Attention: o; if sent to [the Trust] or the Seller, will be mailed, delivered or
telegraphed and confirmed at Onyx Acceptance Financial Corporation, 8001 Irvine
Center Drive, 6th Floor, Irvine, California 92618, Attention: ___________; or if
sent to Onyx, will be mailed, delivered or telegraphed and confirmed to it at
Onyx Acceptance Corporation, 8001 Irvine Center Drive, 5th Floor, Irvine,
California 92618, Attention: ___________. Notwithstanding the foregoing, any
notice to an Underwriter pursuant to Section 7 hereof will be mailed, delivered
or telegraphed and confirmed to such Underwriter.
Section 11. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 7 hereof,
and no other person will have any right or obligation hereunder.
Section 12. Representation of Underwriters. The Representatives will act
for the several Underwriters in connection with the transactions described in
this Agreement, and any action taken by the Representatives under this
Agreement, jointly or by the Lead Underwriter, will be binding upon all the
Underwriters.
Section 13. Representations and Warranties of Underwriters. Each
Underwriter represents and agrees to the following selling restrictions with
respect to the Securities for purposes of the issue of Securities:
(a) Each Underwriter represents and agrees that it will comply with all
applicable laws and regulations in each jurisdiction in which it purchases,
offers or sells Securities or possesses or distributes the Prospectus or any
other offering material and will obtain any consent, approval or permission
required by it for the purchase, offer or sale by it of Securities under the
laws and regulations in force in any jurisdiction to which it is subject or in
which it makes such purchases, offers or sales and none of [the Trust], the
Seller or Onyx shall have any responsibility therefor;
(b) No action has been or will be taken by the Underwriters that would
permit a public offering of the Securities or possession or distribution of any
offering material in relation to the Securities in any jurisdiction where action
for that purpose is required unless [the Trust,] the Seller or Onyx has agreed
to such actions and such actions have been taken;
(c) Each Underwriter represents and agrees that it will not offer, sell
or deliver any of the Securities or distribute any such offering material in or
from any jurisdiction except under circumstances which
-17-
<PAGE> 18
will result in compliance with applicable laws and regulations and which will
not impose any obligation on [the Trust,] the Seller or Onyx or the
Underwriters;
(d) No Underwriter is authorized to give any information or make any
representations in relation to the Securities other than those contained or
incorporated by reference in the Prospectus for the Securities and such
additional information, if any, as [the Trust,] the Seller or Onyx shall, in
writing, provide to and authorize the Underwriter so to use and distribute to
actual and potential purchasers of Securities;
(e) Each Underwriter represents and agrees that it has not, directly or
indirectly, offered or sold and will not, directly or indirectly, offer or sell
in Hong Kong, by means of any document, any Securities other than to persons
whose ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, or in circumstances which do not constitute an offer to the
public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong.
Each Underwriter further represents and agrees that, unless it is a person who
is permitted to do so under the securities laws of Hong Kong, it has not issued,
or had in its possession for the purposes of issuing, and it will not issue, or
have in its possession for the purposes of issuing, any advertisement,
invitation or document relating to Securities other than with respect to
Securities intended to be disposed of to persons outside Hong Kong or to persons
whose business involves the acquisition, or disposal or holding of securities,
whether as principal or agent; and
(f) Each Underwriter has not offered or sold and will not offer or sell
any Securities to persons in the United Kingdom prior to admission of such
Securities to listing in accordance with Part IV of the Financial Services Act
1986 ("FSA") except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 or the
FSA;
(g) Each Underwriter has complied and will comply with all applicable
provisions of the FSA with respect to anything done by us in relation to the
Securities in, from or otherwise involving the United Kingdom; and
(h) Each Underwriter will have only issued or passed on and will only
issue or pass on in the United Kingdom any document received by us in connection
with the issue of the Securities, other than any document which consists of or
any part of listing particulars, supplementary listing particulars or any
document required or permitted to be published by listing rules under Part IV of
the FSA, to a person who is of a kind described in Article 11(3) of the FSA
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
Section 14. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
Section 15. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
-18-
<PAGE> 19
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Seller and Onyx and the
Underwriters in accordance with its terms.
Very truly yours,
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:______________________________________
Name:_________________________________
Title:________________________________
ONYX ACCEPTANCE CORPORATION
By:______________________________________
Name:_________________________________
Title:________________________________
The foregoing Underwriting
Agreement is hereby confirmed
and accepted, as of the
date first above written:
[Names of Investment Banks]
As Representatives of the
several Underwriters
By:____________________________
Name:_______________________
Title:______________________
Acting on behalf of themselves
and as the Representatives of
the several Underwriters.
-19-
<PAGE> 20
Schedule I
<TABLE>
<CAPTION>
Principal Amount Principal Amount Principal Amount
of Class of Class of Class
Underwriter A-1 Securities A-2 Securities A-3 Securities
----------- -------------- -------------- --------------
<S> <C> <C> <C>
_______________ $__________________ $_________________ $________________
_______________ $__________________ $_________________ $________________
</TABLE>
-20-
<PAGE> 1
EXHIBIT 4.1
FORM OF TRUST AGREEMENT
between
ONYX ACCEPTANCE FINANCIAL CORPORATION,
as Depositor,
and
--------,
as Owner Trustee
Dated as of ________, 199_
ONYX ACCEPTANCE OWNER TRUST 199_-_
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS
SECTION 1.01 Definitions............................................................1
ARTICLE II - CREATION OF TRUST
SECTION 2.01 Creation of Trust......................................................4
SECTION 2.02 Office.................................................................4
SECTION 2.03 Purposes and Powers....................................................4
SECTION 2.04 Appointment of Owner Trustee...........................................5
SECTION 2.05 Initial Capital Contribution of Owner Trust Estate.....................5
SECTION 2.06 Declaration of Trust...................................................5
SECTION 2.07 Liability of the Certificateholders, Depositor and Onyx................6
SECTION 2.08 Title to Trust Property................................................6
SECTION 2.09 Situs of Trust.........................................................6
SECTION 2.10 Representations and Warranties of the Depositor........................7
ARTICLE III - CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.01 Initial Ownership......................................................8
SECTION 3.02 The Certificates.......................................................8
SECTION 3.03 Authentication of Certificates.........................................8
SECTION 3.04 Registration of Transfer and Exchange of Certificates..................8
SECTION 3.05 Mutilated, Destroyed, Lost or Stolen Certificates.....................10
SECTION 3.06 Persons Deemed Certificateholders.....................................10
SECTION 3.07 Maintenance of Office or Agency.......................................11
ARTICLE IV - ACTIONS BY OWNER TRUSTEE OR CERTIFICATEHOLDERS
SECTION 4.01 Prior Notice to Certificateholders with Respect to Certain Matters....11
SECTION 4.02 Action by Certificateholders with Respect to Certain Matters..........12
SECTION 4.03 Action with Respect to Bankruptcy.....................................12
SECTION 4.04 Restrictions on Certificateholders' Power.............................12
ARTICLE V - AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 5.01 General Authority.....................................................12
SECTION 5.02 General Duties........................................................13
SECTION 5.03 Action Upon Instruction...............................................13
SECTION 5.04 No Duties Except as Specified in this Agreement or in Instructions....14
SECTION 5.05 No Action Except Under Specified Documents or Instructions............14
SECTION 5.06 Restrictions..........................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI - CONCERNING THE OWNER TRUSTEE
SECTION 6.01 Acceptance of Trusts and Duties.......................................15
SECTION 6.02 Furnishing of Documents...............................................16
SECTION 6.03 Representations and Warranties........................................16
SECTION 6.04 Reliance; Advice of Counsel...........................................17
SECTION 6.05 Not Acting in Individual Capacity.....................................17
SECTION 6.06 Owner Trustee Not Liable for Certificates or Contracts................17
SECTION 6.07 Owner Trustee May Own Certificates and Notes..........................18
ARTICLE VII - COMPENSATION OF OWNER TRUSTEE
SECTION 7.01 Owner Trustee's Fees and Expenses.....................................18
SECTION 7.02 Indemnification.......................................................18
SECTION 7.03 Payments to the Owner Trustee.........................................19
ARTICLE VIII - TERMINATION OF TRUST AGREEMENT
SECTION 8.01 Termination of Trust Agreement........................................19
SECTION 8.02 Dissolution upon Bankruptcy of the Depositor..........................20
ARTICLE IX - SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 9.01 Eligibility Requirements for Owner Trustee............................20
SECTION 9.02 Resignation or Removal of Owner Trustee...............................21
SECTION 9.03 Successor Owner Trustee...............................................21
SECTION 9.04 Merger or Consolidation of Owner Trustee..............................22
SECTION 9.05 Appointment of Co-Trustee or Separate Trustee.........................22
ARTICLE X - MISCELLANEOUS
SECTION 10.01 Supplements and Amendments...........................................23
SECTION 10.02 No Legal Title to Owner Trust Estate in Certificateholders...........24
SECTION 10.03 Limitations on Rights of Others......................................25
SECTION 10.04 Notices..............................................................25
SECTION 10.05 Severability.........................................................25
SECTION 10.06 Counterparts.........................................................25
SECTION 10.07 Successors and Assigns...............................................25
SECTION 10.08 No Petition..........................................................26
SECTION 10.09 No Recourse..........................................................26
SECTION 10.10 Headings.............................................................26
SECTION 10.11 GOVERNING LAW........................................................26
SECTION 10.12 Onyx Payment Obligation..............................................26
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
EXHIBIT A Form of Certificate.........................................................A-1
EXHIBIT B Form of Certificate of Trust................................................B-1
EXHIBIT C Form of Certificate Depository Agreement ...................................C-1
</TABLE>
iii
<PAGE> 5
TRUST AGREEMENT dated as of ______, 199__ between Onyx Acceptance
Financial Corporation, a Delaware corporation (the "Depositor"), and ________, a
_______ banking corporation as Owner Trustee.
ARTICLE I
Definitions
SECTION 1.01 Definitions. Except as otherwise specified herein or in the
context may otherwise require, capitalized terms used but not otherwise defined
herein have the meanings ascribed thereto in the Sale and Servicing Agreement
for all purposes of this Trust Agreement. Except as otherwise provided in this
Agreement, whenever used herein the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
"Administration Agreement" means any agreement executed on or before the
Closing Date among the Trust, the Indenture Trustee and a third party that
undertakes to perform certain of the duties and obligations of the Trust and the
Owner Trustee hereunder, under the Sale and Servicing Agreement and under the
Indenture.
"Agreement" means this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Basic Documents" means the Purchase Agreement, the Agreement, the
Certificate of Trust, the Sale and Servicing Agreement, the Indenture, the
Administration Agreement, the Depository Agreements and the other documents and
certificates delivered in connection herewith and therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Book-Entry Note" means, a beneficial interest in the Notes of any
Class, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11 of the Indenture.
"Business Trust Statute" means Chapter 38 of Title 12 of I the Delaware
Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time to
time.
"Certificate" means a certificate evidencing a beneficial ownership
interest in the Trust, substantially in the form attached hereto as Exhibit A.
"Certificate of Trust" means the Certificate of Trust to be filed with
respect to the formation of the Company pursuant to Section 3810(a) of the
Business Trust Statute, substantially in the form attached hereto as Exhibit B.
1
<PAGE> 6
"Certificate Register" means the register maintained pursuant to Section
3.04.
"Certificateholder" or "Holder" means a Person in whose name a
Certificate is registered in the Certificate Register.
"Certificate Registrar" means the Owner Trustee unless and until a
successor thereto is appointed pursuant to Section 3.04. The Certificate
Registrar initially designates its offices at ________, as its offices for
purposes of Section 3.04.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" means, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at ________; or at
such other address as the Owner Trustee may designate by notice to the
Certificateholders, or the principal corporate trust office of any successor
Owner Trustee (the address of which the successor owner trustee will notify the
Certificateholders).
"Definitive Certificates" shall have the meaning set forth in Section
3.12.
"Depositor" means Finco in its capacity as Depositor hereunder.
"Depository Agreements" means the agreement or agreements dated on or
before the Closing Date among the Trust, as issuer of the Certificates and the
Notes, the Owner Trustee, the Indenture Trustee and the Clearing Agency through
which interests in Book-Entry Notes are transferred.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
"Finco" means Onyx Acceptance Financial Corporation, a Delaware
corporation, its successors and assigns.
"Indenture" means any indenture entered into between the Trust and the
Indenture Trustee named therein pursuant to which a series of Notes is issued.
2
<PAGE> 7
"Notes" means the notes issued by the Trust pursuant to an Indenture
between the Trust and an Indenture Trustee, dated on or after the date hereof,
having the payment and other terms set forth in such Indenture.
"Onyx" means Onyx Acceptance Corporation, a Delaware corporation, its
successors and assigns.
"Owner Trust Estate" means all right, title and interest of the Trust in
and to the property and rights assigned to the Trust pursuant to Article II of
the Sale and servicing Agreement, all funds on deposit from time to time in the
Trust Accounts and all other property of the Trust from time to time, including
any rights of the Owner Trustee and the Trust pursuant to the Sale and Servicing
Agreement and the Administration Agreement.
"Owner Trustee" means ________, a [Delaware banking corporation], not in
its individual capacity but solely as owner trustee under this Agreement, and
any successor Owner Trustee hereunder.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 3.09, and shall initially be ________.
"Purchase Agreement" means that certain Sale and Servicing Agreement,
dated as of September 8, 1994, as amended, between Onyx, as seller, and Finco,
as purchaser of the Contracts.
"Record Date" means, with respect to any Distribution Date, the calendar
day immediately preceding such Distribution Date or, if Definitive Certificates
have been issued, the last day of the month immediately preceding the month in
which such Distribution Date occurs. Any amount stated "as of a Record Date" or
"on a Record Date" shall give effect to (i) all applications of collections, and
(ii) all distributions to any party under this Agreement, the Sale and Servicing
Agreement or the Indenture, or to the related Obligor, as the case may be, in
each case as determined as of the opening of business on the related Record
Date.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of the date hereof, among the Trust, Finco, as seller, and Onyx, as
servicer.
"Secretary of State" means the Secretary of State of the State of
[Delaware].
"Treasury Regulations" means regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" means the Onyx Acceptance Owner Trust 199_-_ formed as a
Delaware business trust pursuant to this Agreement and the filing of the
Certificate of Trust.
3
<PAGE> 8
SECTION 1.02 Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation."
ARTICLE II
Creation of Trust
SECTION 2.01 Creation of Trust. Upon the execution of this Agreement by
the parties hereto and the prompt filing thereafter of the Certificate of Trust,
there is hereby created the "Onyx Acceptance Owner Trust 199_-_", in which name
the Owner Trustee may conduct the business of the Trust, make and execute
contracts and other instruments on behalf of the Trust and sue and be sued.
SECTION 2.02 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in
[Delaware] as the Owner Trustee may designate by written notice to the
Certificateholders and the Depositor.
SECTION 2.03 Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue Notes pursuant to an Indenture and Certificates
pursuant to this Agreement and to sell such Notes and Certificates;
(ii) with the proceeds of the sale of Notes and Certificates to
pay the organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Depositor pursuant to the Sale and
Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to, and on the terms and conditions set forth in,
the Indenture and to hold, manage and distribute to the
Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Trust Estate released from the Lien of, and
remitted to the Trust pursuant to, the Indenture as set forth herein;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
4
<PAGE> 9
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Owner Trust Estate and the making of distributions to the
Certificateholders and the Noteholders and in respect of amounts to be
released to the Depositor, the Servicer, the Administrator or [and third
party, if any].
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing and
as required or authorized by the terms of the Basic Documents.
SECTION 2.04 Appointment of Owner Trustee. The Depositor hereby appoints
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.05 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Collection Account. The Depositor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
SECTION 2.06 Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be treated
as a partnership, with the assets of the partnership being the Contracts and
other assets held by the Trust, the partners of the partnership being the
Certificateholders, and the Notes being debt of the partnership. The parties
agree that, unless otherwise required by appropriate tax authorities, the Trust
will file or cause to be filed annual or other necessary returns, reports and
other forms consistent with the characterization of the Trust as a partnership
for such tax purposes. Effective as of the date hereof, the Owner Trustee shall
have all rights, powers and duties set forth herein and in the Business Trust
Statute with respect to accomplishing the purposes of the Trust.
5
<PAGE> 10
SECTION 2.07 Liability of the Certificateholders, Depositor and Onyx.
(a) The Depositor and Onyx shall be liable directly to and will
indemnify and hold harmless the Trustee and the Indenture Trustee for any loss,
liability or expense of the Trust (including Expenses, to the extent not paid
out of the owner Trust Estate) to the extent that the Company would be liable if
the Trust were a partnership under the [Delaware] Revised Uniform Limited
Partnership Act in which the Company were a general partner; provided, however,
that the Depositor and Onyx shall not be liable for any losses incurred by a
Certificateholder in the capacity of an investor in the Certificates or a
Noteholder in the capacity of an investor in the Notes and will not and shall
not be deemed hereby to have indemnified the Trustee or Indenture Trustee
against any loss liability or expense resulting from such Trustee's own willful
misfeasance, bad faith or negligence or by reason of a breach of representation
or warranty thereof contained herein or in the Indenture, as the case may be. In
addition, any third party creditors of the Trust (other than in connection with
the obligations described in the provisions in the preceding sentence for which
the Company shall not be liable) shall be deemed to be third party beneficiaries
of this paragraph. The obligations of the Depositor and Onyx under this
paragraph shall be evidenced by the Certificates described in Section 3.10,
which for purposes of the Business Trust Statute shall be deemed to be a
separate class of Certificates from all other Certificates issued by the Trust;
provided, that the rights and obligations evidenced by all Certificates,
regardless of class, shall, except as provided in this Section, be identical.
(b) Except to the extent set forth in paragraph (a), no
Certificateholder shall have any personal liability for any liability or
obligation of the Trust.
SECTION 2.08 Title to Trust Property. Legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.09 Situs of Trust. The Trust will be located and administered
in the state of [Delaware]. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of [Delaware] or the State of
New York. The Trust shall not have any employees in any state other than
[Delaware]; provided, however, that nothing herein shall restrict or prohibit
the Owner Trustee from having employees within or without the State of
[Delaware]. Payments will be received by the Trust only in [Delaware] or New
York, and payments will be made by the Trust only from [Delaware] or [New York].
The only office of the Trust will be at the Corporate Trust Office in
[Delaware].
6
<PAGE> 11
SECTION 2.10 Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Owner Trustee
that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
presently conducted, and has corporate power, authority and legal right
to acquire, own and sell property including the Contracts.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such
qualifications.
(iii) The Depositor has the corporate power and authority to
execute and deliver this Agreement and to carry out its terms; the
Depositor has full corporate power and authority to sell and assign the
property to be sold and assigned to and deposited with the Trust and the
Depositor has duly authorized such sale and assignment and deposit to
the Trust by all necessary corporate action; and the execution, delivery
and performance of this Agreement has been duly authorized by the
Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound, nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Depositor or its properties which breach, default, conflict, lien or
violation would have a material adverse effect on the earnings, business
affairs or business prospects of the Depositor.
(v) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or to
the Depositor's knowledge, threatened, against or affecting the
Depositor: (i) asserting the invalidity of this Agreement, (ii) seeking
to prevent the consummation of any of the transactions contemplated by
this Agreement, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or
7
<PAGE> 12
enforceability of, this Agreement or (iv) relating to the Depositor and
which might adversely affect the federal income tax attributes of the
Trust or the Certificates or Notes.
ARTICLE III
Certificates and Transfer of Interests
SECTION 3.01 Initial Ownership. Upon the formation of the Trust by the
transfer by the Depositor of the initial capital contribution pursuant to
Section 2.05, and until the issuance of the Certificates, the Depositor shall be
the sole Certificateholder of the Trust.
SECTION 3.02 The Certificates. The Certificates shall be executed on
behalf of the Trust by manual or facsimile signature of a Responsible Officer of
the Owner Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued and entitled
to the benefit of this Agreement, notwithstanding that such individuals or any
of them shall have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of
authentication and delivery of such Certificates.
A transferee of a Certificate shall become a Certificateholder, and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder, upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 3.04.
SECTION 3.03 Authentication of Certificates. Concurrently with the
initial sale of the Contracts to the Trust pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause to be executed, authenticated and
delivered on behalf of the Trust to or upon the written order of the Depositor,
Certificates evidencing the entire ownership of the Trust. No Certificate shall
entitle its holder to any benefit under this Agreement or be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or ________, as the Owner Trustee's authenticating agent, by
manual or facsimile signature of a Responsible Officer, and such authentication
shall constitute conclusive evidence, and the only evidence, that such
Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
SECTION 3.04 Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. [The Owner Trustee] [________]
shall be the initial Certificate Registrar. In the event that the Certificate
Registrar shall for any reason become unable to act as Certificate Registrar,
the Certificate Registrar shall promptly give written notice to such effect to
the Depositor, the Owner Trustee and the Servicer. Upon receipt of
8
<PAGE> 13
such notice, the Servicer shall appoint another bank or trust company, having an
office or agency located in the [Borough of Manhattan], The City of New York,
and that shall agree to act in accordance with the provisions of this Agreement
applicable to it, and otherwise acceptable to the Owner Trustee, to act as
successor Certificate Registrar under this Agreement.
(b) Upon surrender for registration of transfer of any Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause ________ as its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Certificates dated the date of
authentication by the Owner Trustee or any authenticating agent.
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or his attorney duly authorized in writing. Each
Certificate surrendered for registration of transfer or exchange shall be
cancelled and disposed of by the Owner Trustee in accordance with its customary
practice.
No transfer of a Certificate shall be made unless the Owner Trustee
shall have received a representation from the transferee of such Certificate
acceptable to and in form and substance satisfactory to the Owner Trustee to the
effect that:
(i) such transferee (A) is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section
4975 of the Code (a "Plan"), nor a person acting on behalf of a Plan nor
using the assets of a Plan to effect such transfer, and (B) is not an
insurance company purchasing a Certificate with funds contained in an
"insurance company general account" (as defined in Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) as to which
there is a Plan with respect to which the amount of such general
account's reserves and liabilities for the contracts held by or on
behalf of such Plan and all other Plans maintained by the same employer
(or affiliate thereof as defined in Section V(a)(1) of PTCE 95-60) of by
the same employee organization exceed 10% of the total of all reserves
and liabilities of such general account (as such amounts are determined
under Section I(a) of PTCE 95-60) at the date of acquisition; or
(ii) is a Plan or is an insurance company purchasing a
Certificate with funds contained in an insurance company general
account, having attached thereto an opinion of counsel satisfactory to
the Owner Trustee, which opinion shall not be an expense of either the
Owner Trustee or the Trust, addressed to the Owner Trustee, to the
effect that the purchase or holding of such Certificate will not result
in the assets of the Owner Trust Estate being deemed to be "plan assets"
and subject to the prohibited transaction provisions of ERISA and the
Code and will not subject the Owner Trustee to any obligation in
addition to those expressly undertaken in this Agreement or to any
liability.
9
<PAGE> 14
Notwithstanding anything else to the contrary herein, any purported transfer of
a Certificate to or on behalf of an employee benefit plan subject to ERISA or to
the Code or to an insurance company purchasing with funds from a general account
not exempt pursuant to PTCE 95-60 without the delivery to the Owner Trustee of
an opinion of counsel satisfactory to the Owner Trustee as described in clause
(ii) above shall be void and of no effect.
To the extent permitted under applicable law (including, but not limited
to, ERISA), the Owner Trustee shall be under no liability to any Person for any
registration of transfer of any Certificate that is in fact not permitted by
this Section 3.04(c) or for taking any other action with respect to such Holder
under the provisions of this Trust Agreement or the Sale and Servicing Agreement
so long as the transfer was registered by the Certificate Registrar or the Owner
Trustee in accordance with the foregoing requirements.
(d) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
SECTION 3.05 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
________, as the Owner Trustee's authenticating agent, shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and denomination. Every
person by virtue of becoming a Certificateholder in accordance with this
Agreement shall be deemed to be bound by the terms of this Agreement. In
connection with the issuance of any new Certificate under this Section, the
Owner Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this Section
shall constitute conclusive evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.06 Persons Deemed Certificateholders. Every person by virtue
of becoming a Certificateholder in accordance with this Agreement shall be
deemed to be bound by the terms of this Agreement. Prior to due presentation of
a Certificate for registration of transfer, the Owner Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and for all
other purposes whatsoever, and neither the Owner Trustee nor the Certificate
Registrar shall be bound by any notice to the contrary.
10
<PAGE> 15
SECTION 3.07 Maintenance of Office or Agency. The Owner Trustee shall
maintain in the [Borough of Manhattan, The City of New York], an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Certificates and the Basic Documents may be
served. The Owner Trustee initially designates ________, [Address], as its
principal corporate trust office for such purposes. The Owner Trustee shall give
prompt written notice to the Depositor and to the Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
ARTICLE IV
Actions By Owner Trustee or Certificateholders
SECTION 4.01 Prior Notice to Certificateholders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Contracts) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Contracts);
(b) the election by the Trust to file an amendment, to the Certificate
of Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture, whether or not by a Supplemental
Indenture, in circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture, whether or not by a Supplemental
Indenture, in circumstances where the consent of any Noteholder is not required
but such amendment materially adversely affects the interest of the
Certificateholders;
(e) the amendment, change or modification of the Administration
Agreement, other than to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially adversely
affect the interests of the Certificateholders; or
(f) the appointment (i) pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee, (ii) pursuant to this Agreement of
a successor Certificate Registrar or
11
<PAGE> 16
(iii) any consent by the Note Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar to the assignment of its respective obligations under the
Indenture or this Agreement, as applicable.
SECTION 4.02 Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders, to (a) remove the Administrator pursuant to [Section
8] of the Administration Agreement, (b) appoint a successor Administrator
pursuant to [Section 8] of the Administration Agreement, (c) remove the Servicer
pursuant to [Section 8.01] of the Sale and Servicing Agreement or (d) except as
expressly provided in the Basic Documents, sell the Contracts after the
termination of the Indenture. The Owner Trustee shall take the actions referred
to in the preceding sentence only upon written instructions signed by the
authorized representative of 100% of the Certificateholders.
SECTION 4.03 Action with Respect to Bankruptcy. The Owner Trustee shall
not have the power to commence a voluntary proceeding in bankruptcy relating to
the Trust without the unanimous prior approval of all Certificateholders and the
delivery to the Owner Trustee by each such Certificateholder of a certificate
certifying that such Certificateholder reasonably believes that the Trust is
insolvent.
SECTION 4.04 Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any
obligations of the Trust or of the Owner Trustee under any of the Basic
Documents or would be contrary to Section 2.03 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
ARTICLE V
Authority and Duties of Owner Trustee
SECTION 5.01 General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment thereto, in each case, in such form as the Depositor shall approve as
evidenced conclusively by the Owner Trustee's execution thereof, and, on behalf
of the Trust, to direct the Indenture Trustee to authenticate and deliver Class
A-1 Notes in the aggregate principal amount of $________ , Class A-2 Notes in
the aggregate principal amount of $________, and Class A-3 Notes in the
aggregate principal amount of $________ having the terms and conditions set
forth in Exhibits A-1, A-2 and A-3 to the Indenture in the form executed on the
Closing Date. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust, pursuant to
the Basic Documents. The Owner Trustee is further authorized from time to time
to take such action as the Administrator recommends with respect to the Basic
Documents.
12
<PAGE> 17
SECTION 5.02 General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Certificateholders,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed to
have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator to carry out such
obligations or fulfill such duties under the Administration Agreement.
SECTION 5.03 Action Upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the Basic
Documents, the Certificateholders may by written instruction direct the Owner
Trustee in the management of the Trust. Such direction may be exercised at any
time by written instruction of the Certificateholders pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder
or under any Basic Document if the Owner Trustee reasonably shall have
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Certificateholders
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction received from Certificateholders representing the plurality based on
the percentage interest of the Trust represented by Certificates held by
Certificateholders responding, the Owner Trustee shall not be liable on account
of such action to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with the Basic Documents, as it shall
deem to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances)
13
<PAGE> 18
to the Certificateholders requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with any
written instruction received from Certificateholders representing the plurality
based on outstanding percentage interest of the Trust represented by
Certificates held by Certificateholders responding, the Owner Trustee shall not
be liable, on account of such action or inaction, to any Person. If the Owner
Trustee shall not have received appropriate instruction within 10 days of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, not inconsistent with
the Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 5.04 No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any Basic Document or otherwise
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement or in any document or written
instruction received by the Owner Trustee pursuant to section 5.03. No implied
duties or obligations shall be read into this Agreement or any Basic Document
against the Owner Trustee. The Owner Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or otherwise to perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any liens
on any part of the Owner Trust Estate that result from actions by, or claims
against, the Owner Trustee that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 5.05 No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 5.03.
SECTION 5.06 Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for Federal income tax purposes.
The Certificateholders shall not have the authority to and, by acceptance of an
ownership interest in any Certificate shall thereby be deemed to have covenanted
not to, direct the Owner Trustee to take action that would violate the
provisions of this Section.
14
<PAGE> 19
ARTICLE VI
Concerning the Owner Trustee
SECTION 6.01 Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it or under its
control constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or negligence or (ii) in the case of
the inaccuracy of any representation or warranty of the Owner Trustee contained
in Section 6.03 or made by the Owner Trustee in any other agreement, document or
certificate made or delivered in connection with this Agreement or any Basic
Document. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any reasonable error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator, as provided in the Administration Agreement, or the
Certificateholders, as provided herein;
(c) no provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of (i)
the validity or sufficiency of this Agreement, (ii) the due execution hereof by
the Depositor, (iii) the form, character, genuineness, sufficiency, value or
validity of any portion of the Owner Trust Estate or (iv) the validity or
sufficiency of the Basic Documents, other than the certificate of authentication
on the Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any Certificateholder,
other than as expressly provided for herein and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Servicer, the Depositor or the Indenture Trustee under
any of the Basic
15
<PAGE> 20
Documents or otherwise, and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under the Basic Documents that
are required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Servicer under the
Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under or in relation to this Agreement or any Basic
Document or otherwise, at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Owner
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Basic Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable therefor other than for its negligence or
willful misconduct in the performance thereof.
SECTION 6.02 Furnishing of Documents. The Owner Trustee shall furnish
(a) to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents and (b) to Noteholders promptly upon
written request therefor, copies of the Sale and Servicing Agreement, the
Administration Agreement and the Trust Agreement.
SECTION 6.03 Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor and the Certificateholders, that:
(a) It is a [banking corporation] duly organized and validly existing in
good standing under the laws of [the State of Delaware]. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and each other Basic Document.
(b) It has taken all corporate action necessary to authorize the
execution and delivery of this Agreement and each other Basic Document, and this
Agreement and each other Basic Document will be executed and delivered by one of
its officers duly authorized to execute and deliver this Agreement and each
other Basic Document on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement nor
the consummation by the Owner Trustee of the transactions contemplated hereby or
thereby nor compliance by it with any of the terms or provisions hereof or
thereof will contravene any federal or [Delaware] law, governmental rule or
regulation governing the [banking or trust] powers of the Owner Trustee or any
judgment or order binding on it, or constitute any default under its charter
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.
16
<PAGE> 21
SECTION 6.04 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a Certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under the Basic Documents, the Owner
Trustee (i) may act directly or through its agents or attorneys pursuant to
agreements entered into with any of them, and the Owner Trustee shall not be
liable for the conduct or misconduct of such agents or attorneys if such agents
or attorneys shall have been selected by the Owner Trustee with reasonable care,
and (ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons and not contrary to this Agreement or any Basic Document.
SECTION 6.05 Not Acting in Individual Capacity. Except as provided in
this Article VI, in accepting the trusts hereby created, ________ acts solely as
Owner Trustee hereunder and not in its individual capacity. All Persons having
any claim against the Owner Trustee by reason of the transactions contemplated
by this Agreement or any Basic Document shall look only to the Owner Trust
Estate for payment or satisfaction thereof.
SECTION 6.06 Owner Trustee Not Liable for Certificates or Contracts. The
recitals contained herein and in the Certificates (other than the signature of
the Owner Trustee and the certificate of authentication on the Certificates)
shall be taken as the statements of the Depositor and the Company, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of any Basic Document
or of the Certificates (other than the signature of the Owner Trustee and the
certificate of authentication on the Certificates) or the Notes (other than the
signature of the Owner Trustee on the Notes), or of any Contract or related
document. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Contract, or the perfection and priority of any security interest created by
any Contract in any Financed vehicle or the maintenance of any such perfection
and priority, or for or with respect to the sufficiency of the Owner Trust
Estate or the sufficiency to generate the payments to be distributed to
Certificateholders
17
<PAGE> 22
under this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence and
contents of any Contract on any computer or other record thereof; the validity
of the assignment of any Contract to the Trust or of any intervening assignment;
the completeness of any Contract; the performance or enforcement of any
Contract; the compliance by the Depositor, the Company or the Servicer with any
warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation or any action of
the Administrator, the Indenture Trustee or the Servicer or any subservicer
taken in the name of the Owner Trustee.
SECTION 6.07 Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Depositor, the Company, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
ARTICLE VII
Compensation of Owner Trustee
SECTION 7.01 Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Company and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Company
for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.
SECTION 7.02 Indemnification. The Depositor shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including the reasonable fees and expenses of counsel) of any kind and nature
whatsoever (collectively, "Expenses") which may at any time be imposed on,
incurred by, or asserted against the Owner Trustee or any Indemnified Party in
any way relating to or arising out of the Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, except only that the Depositor shall not be
liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 6.01. The indemnities contained in this Section 8.03 shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In the event of any claim, action or proceeding for which
indemnity is sought pursuant to this Section, the Owner Trustee's choice of
legal counsel shall be subject to the approval of the Depositor, which approval
shall not be unreasonably withheld.
18
<PAGE> 23
SECTION 7.03 Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE VIII
Termination of Trust Agreement
SECTION 8.01 Termination of Trust Agreement.
(a) This Agreement (other than Article VII) and the Trust shall
terminate and be of no further force or effect, (i) upon the final distribution
by the Owner Trustee of all moneys or other property or proceeds of the Owner
Trust Estate in accordance with the terms of this Agreement, [Article V] of the
Indenture and the Sale and Servicing Agreement or (ii) at the time provided in
Section 9.02. The bankruptcy, liquidation, dissolution, death or incapacity of
any Certificateholder, other than the Company as described in Section 9.02,
shall not (x) operate to terminate this Agreement or the Trust, nor (y) entitle
such Certificateholder's legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court for a partition or winding up
of all or any part of the Trust or Owner Trust Estate nor (z) otherwise affect
the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholders shall surrender their Certificates to the
[Paying Agent] for payment of the final distributions and cancellation, shall be
given by the Owner Trustee by letter to the Certificateholders mailed within
five Business Days of receipt of notice of such termination from the Servicer
given pursuant to [Section 9.01(c)] of the Sale and Servicing Agreement, stating
(i) the Distribution Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the [Paying Agent] therein designated, (ii) the amount of any
such final payment and (iii) that payment to be made on such Distribution Date
will be made only upon presentation and surrender of the Certificates at the
office of the [Paying Agent] therein specified. The Owner Trustee shall give
such notice to the Certificate Registrar (if other than the Owner Trustee) [and
the Paying Agent] at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the [Paying Agent] shall cause
to be distributed to Certificateholders amounts distributable on such
Distribution Date pursuant to [Section ___] of the Sale and Servicing Agreement.
In the event that one or more of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one
19
<PAGE> 24
year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Owner Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Owner Trustee to the Depositor.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3820 of the Business Trust Statute.
SECTION 8.02 Dissolution upon Bankruptcy of the Depositor. In the event
that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 8.01 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from Certificateholders
representing at least 51% of the percentage interest of the Trust to the effect
that each such party disapproves of the liquidation of the Contracts and
termination of the Trust. Promptly after the occurrence of any Insolvency Event
with respect to the Depositor, (A) the Depositor shall give the Indenture
Trustee and the Owner Trustee written notice of such Insolvency Event, (B) the
Owner Trustee shall, upon the receipt of such written notice from the Depositor,
give prompt written notice to the Certificateholders and the Indenture Trustee,
of the occurrence of such event and (C) the Indenture Trustee shall, upon
receipt of written notice of such Insolvency Event from the Owner Trustee or the
Depositor, give prompt written notice to the Noteholders of the occurrence of
such event; provided, however, that any failure to give a notice required by
this sentence shall not prevent or delay, in any manner, a termination of the
Trust pursuant to the first sentence of this Section 8.02. Upon a termination
pursuant to this Section 8.02, the Owner Trustee shall direct the Indenture
Trustee promptly to sell the assets of the Trust (other than the Trust Accounts
and the Collection Account) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds of such a sale of the assets of the
Trust shall be treated as collections under the Sale and Servicing Agreement and
deposited in the Collection Account and distributed pursuant to the terms
thereof.
ARTICLE IX
Successor Owner Trustees and Additional Owner Trustees
SECTION 9.01 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be an entity satisfying the provisions of Section
3807(a) of the Business Trust Statute authorized to exercise corporate powers,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authorities, and having (or
having a parent which has) a rating of at least Baa3 by Moody's. If such entity
shall publish reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section 9.01, the combined capital and surplus of
20
<PAGE> 25
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any time
the Owner Trustee shall cease to be eligible in accordance with the provisions
of this Section, the Owner Trustee shall resign immediately in the manner and
with the effect specified in Section 9.02.
SECTION 9.02 Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Depositor, the Administrator and the
Indenture Trustee. Upon receiving such notice of resignation, the Administrator
shall promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which shall be delivered to each of the resigning Owner
Trustee and the successor Owner Trustee. If no successor Owner Trustee shall
have been so appointed or shall not have accepted such appointment within 30
days after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 9.01 and shall fail to resign
promptly, or if at any time the Owner Trustee shall be legally unable to act, or
shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or
of its property shall be appointed, or any public officer shall take charge or
control of the Owner Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Administrator may remove
the Owner Trustee by written instrument to such effect delivered to the Owner
Trustee, the Depositor and the Indenture Trustee. If the Administrator shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Administrator shall promptly appoint a successor Owner Trustee by
written instrument in duplicate, one copy of which instrument shall be delivered
to each of the outgoing Owner Trustee so removed the successor Owner Trustee and
payment of all fees, expenses and other compensation owed to the outgoing Owner
Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 9.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 9.03 Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 9.02 shall execute, acknowledge and deliver to the
Administrator and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties, and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Administrator and the predecessor Owner Trustee
shall
21
<PAGE> 26
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
meet the criteria for eligibility set forth in Section 9.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Indenture Trustee, the Noteholders and
the Rating Agencies. If the Administrator fails to mail such notice within 10
days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
SECTION 9.04 Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 9.01, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided,
further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 9.05 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within 25 days after the
receipt by it of a request so to do, the Owner Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 9.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provision and conditions:
22
<PAGE> 27
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee joining in
such act), except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed, the Owner
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties, and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Administrator and the Owner Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as if given to each of them. Every instrument any separate trustee or co-trustee
shall refer Agreement and the conditions of this Article. Each separate trustee
and co-trustee, upon its acceptance of conferred, shall be vested with the
estates or specified in its instrument of appointment, either jointly with the
Owner Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited. by law, to do any lawful act under or in respect, of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE X
Miscellaneous
SECTION 10.01 Supplements and Amendments. This Agreement may be amended
by the Depositor, the Company and the Owner Trustee, with prior written notice
to the Rating Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying
23
<PAGE> 28
in any manner the rights of the Noteholders or the Certificateholders provided,
however, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with prior written notice to the Rating Agencies, with
the consent of the Holders of Notes evidencing not less than 51% of the
outstanding principal amount of the Notes and the consent of the Holders of
Certificates evidencing not less than a majority percentage interest of the
Trust, for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Contracts or distributions that shall be required to be made for the benefit of
the Noteholders or the Certificateholders or (b) reduce the aforesaid
percentages of Noteholders and Certificateholders outstanding principal amount
required to consent to any such amendment, without the consent of the holders of
all the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 10.02 No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided ownership interest therein
only in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their ownership interest
24
<PAGE> 29
in the Owner Trust Estate shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate.
SECTION 10.03 Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Company, the Certificateholders, the Administrator
and to the extent expressly provided herein the Indenture Trustee and the
Noteholders, and nothing in this Agreement, (other than Section 2.07), whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 10.04 Notices.
(a) Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing and shall be deemed given upon receipt
by the intended recipient or three Business Days after mailing if mailed by
certified mail, postage prepaid (except that notice to the Owner Trustee shall
be deemed given only upon actual receipt by the Owner Trustee), if to the Owner
Trustee, addressed to the Corporate Trust Office; if to the Depositor, addressed
to Onyx Acceptance Financial Corporation, 8001 Irvine Center Drive, 6th Floor,
Irvine, California 92618, Attention: Secretary; if, to the Trust, addressed to
Onyx Acceptance Owner Trust 199_-_, __________________; or, as to each party, at
such other address as shall be designated by such party in a written notice to
each other party.
(b) Any notice required or permitted to be given a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 10.05 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid or unenforceable in any jurisdiction, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 10.06 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed to
be an original, and all of which shall constitute but one and the same
instrument.
SECTION 10.07 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Owner Trustee and its successors and each
Certificateholder and its successors and permitted assigns, all as herein
25
<PAGE> 30
provided. Any request, notice, direction, consent, waiver or other instrument or
action by an Certificateholder shall bind the successors and assigns of such
owner.
SECTION 10.08 No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement hereby
covenants and agrees, each Certificateholder, by accepting a Certificate, and
the Indenture Trustee and any Noteholder by accepting the benefits of this
Agreement, are thereby deemed to covenant and agree that they will not at any
time institute against the Depositor or the Trust, or join in any institution
against the Depositor or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any federal or state bankruptcy or similar law. This Section 10.09 shall survive
the termination of this Agreement or the termination of the Owner Trustee under
this Agreement.
SECTION 10.09 No Recourse. Each Certificateholder by accepting an
interest in a Certificate acknowledges that such Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor (in any capacity), Onyx, the Administrator, the
Owner Trustee, the Indenture Trustee or any Affiliate thereof and no recourse
may be had against such parties or their assets, except as may be expressly set
forth or contemplated in the Certificates or the Basic Documents.
SECTION 10.10 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [DELAWARE], WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 10.12 Onyx Payment Obligation. The parties hereto acknowledge
and agree that Onyx shall be responsible for payment of the Administrator's fees
under the Administration Agreement and shall reimburse the Administrator for all
expenses and liabilities of the Administrator incurred thereunder. The parties
hereto covenant and agree that neither of them shall look to the other for
payment of any such fees or expenses.
26
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
ONYX ACCEPTANCE FINANCIAL CORPORATION,
Depositor
By:_____________________________________
Name:
Title:
________________________________________,
not in its individual capacity but solely
as Owner Trustee
By:_____________________________________
Name:
Title:
27
<PAGE> 32
EXHIBIT A
NUMBER
R-
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS NOT TRANSFERABLE,
EXCEPT UNDER THE LIMITED CONDITIONS
SPECIFIED IN THE TRUST AGREEMENT
---------------------------------
AUTO LOAN BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of retail
installment sale contracts secured by new or used automobiles, vans or light
duty trucks and sold to the Trust by Onyx Acceptance Financial Corporation.
(THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ONYX
ACCEPTANCE FINANCIAL CORPORATION OR ANY OF ITS AFFILIATES, EXCEPT TO THE EXTENT
DESCRIBED BELOW.)
THIS CERTIFIES THAT _____________________ is the registered owner of a
nonassessable, fully-paid, beneficial ownership interest in certain
distributions of Onyx Acceptance Owner Trust 199__-__ (the "Trust") formed by
Onyx Acceptance Financial Corporation, a Delaware corporation (the "Seller").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Certificate referred to in the within-mentioned Trust
Agreement.
______________________________ _______________________________________
not in its individual capacity not in its individual capacity
but solely as Owner Trustee but solely as Owner Trustee
-or-
By:____________________________ By:______________________________________
Authenticating Agent
By:________________________________
A-1
<PAGE> 33
The Trust was created pursuant to a Trust Agreement dated as of
__________, 199___ (the "Trust Agreement"), between the Seller and
_______________________, as owner trustee (the "Owner Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This is one of the duly authorized Certificates designated as "Auto Loan
Backed Certificates" (herein called the "Certificate"). Also issued under the
Indenture dated as of _________, 199___, among the Trust, ____________________,
as indenture trustee, are three classes of Notes designated as "Class A-1 ____%
Auto Loan Backed Notes" (the "Class A-1 Notes"), "Class A-2 ___% Auto Loan
Backed Notes" (the "Class A-2 Notes") and "Class A-3 ___% Auto Loan Backed
Notes" (the "Class A-3 Notes", together with the Class A-2 Notes and the Class
A-1 Notes, the "Notes"). This Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes a
pool of retail installment sale contracts secured by new and used automobiles,
vans or light duty trucks (the "Contracts"), all monies due thereunder on or
after Initial Cut-Off Date, security interests in the vehicles financed thereby,
certain bank accounts and the proceeds thereof, proceeds from claims on certain
insurance policies and certain other rights under the Trust Agreement and the
Sale and Servicing Agreement, all right, to and interest of the Seller in and to
the Purchase Agreement dated as of ___________ among Onyx Acceptance Corporation
and the Seller and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the _____ day of
each month or, if such _____ day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on ___________, 199__, to the Person in
whose name is on this Certificate the pro rata amount to be distributed to the
Certificateholder on such Distribution Date. No principal will be paid on this
Certificate until the Class A-3 Notes have been paid in full.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, as applicable.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder without the presentation or surrender of this Certificate or
the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Borough of Manhattan, The City of New York.
A-2
<PAGE> 34
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-3
<PAGE> 35
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Certificate to be duly executed.
ONYX ACCEPTANCE OWNER TRUST 199__-__
By:____________________________________
not in its individual capacity but
solely as Owner Trustee
By:_________________________________
Dated:
A-4
<PAGE> 36
(Reverse of Certificate)
The Certificate does not represent an obligation of, or an interest in,
the Seller, the Servicer, the Owner Trustee or any Affiliates of any of them and
no recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated herein or in the Trust Agreement, the
Indenture or the Basic Documents. In addition, this Certificate is not
guaranteed by any governmental agency or instrumentality and is limited in right
of payment to certain collections with respect to the Receivables, all as more
specifically set forth herein and in the Sale and Servicing Agreement. A copy of
each of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Seller, and at such
other places, if any, designated by the Seller, by any Certificateholder upon
written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller under the Trust Agreement at any time by the Seller and the Owner Trustee
with the consent of the Holders of Notes representing not less than 51% of the
outstanding principal amount of the Note and the Holders of Certificates
representing not less than a majority percentage interest of the Trust. Any such
consent by the Certificateholders shall be conclusive and binding on such
Certificateholders and on all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Certificateholders.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in the Borough of Manhattan, The City of New York, accompanied
by a written instrument of transfer in form satisfactory to the Owner Trustee
and the Certificate Registrar duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon a new Certificate
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee. The initial Certificate Registrar appointed under the
Trust Agreement is ______________________. No service charge will be made for
any such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.
The Owner Trustee, the Security Insurer and any agent of the Owner
Trustee or the Security Insurer may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Security Insurer nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to the
Certificateholders of all amounts required to be paid to it pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the disposition of all
property held as part of the Trust. The Servicer of the Contracts may at its
option purchase the corpus of the Trust at a price specified in the Sale and
Servicing Agreement, and such purchase of the Contracts and other property of
the Trust will effect early retirement of the Certificate; however, such right
of purchase is exercisable, subject to certain restrictions, only as of the last
day of any Monthly Period as of which the Pool Balance is 10% or less of the
Original Pool Balance. The Certificate is also subject to mandatory prepayment,
pro rata on the basis of the initial Certificate Balance, on the Distribution
Date on or immediately following the last day of the Funding Period in the event
that any portion of the Prefunded Amount remains on deposit in the Prefunding
Account after giving effect to the purchase of all Subsequent Contracts,
including any purchase of Subsequent Contracts on such date. The aggregate
principal amount of the Certificate to be prepaid will be an amount equal to the
Certificate Prepayment Amount.
The Certificate may not be acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (b) a plan
A-5
<PAGE> 37
described in Section 4975(e) (1) of the Code or (c) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity (each,
a "Benefit Plan"). By accepting and holding this Certificate, the Holder hereof
shall be deemed to have represented and warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Receivable or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the Holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
A-6
<PAGE> 38
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
_______________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_____________________________________________________________________Attorney to
transfer said Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:_______________
_____________________________________*/
Signature Guaranteed:
_____________________________________*/
_____________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the Now York Stock Exchange or a commercial bank
or trust company.
A-7
<PAGE> 39
EXHIBIT B
CERTIFICATE OF TRUST OF
ONYX ACCEPTANCE OWNER TRUST 199__-__
THIS Certificate of Trust of ONYX ACCEPTANCE OWNER TRUST 199__-__ (the
"Trust"), dated as of ________, is being duly executed and filed by ________, a
[Delaware banking corporation], as trustee, to form a business trust under the
[Delaware Business Trust Act (12 Del. Code, Section 3801 et seq.)].
1. Name. The name of the business trust formed hereby is ONYX
ACCEPTANCE OWNER TRUST 199__-__.
2. [Delaware] Trustee. The name and business address of the trustee of
the Trust in the State of [Delaware] is ________, [Address], Attention:
________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
___________,
not in its individual capacity but
solely as owner trustee under a
Trust Agreement dated as of ________,
By:_________________________________
Name:
Title:
B-1
<PAGE> 1
EXHIBIT 4.2
FORM OF INDENTURE
between
ONYX ACCEPTANCE OWNER TRUST 199_-_,
as Issuer
and
(____________________),
as Indenture Trustee
Dated as of __________, 199__
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - Definitions and Incorporation by Reference.......................................2
SECTION 1.1 Definitions......................................................2
SECTION 1.2 Incorporation by Reference of Trust Indenture Act................9
SECTION 1.3 Rules of Construction............................................9
ARTICLE II - The Notes......................................................................10
SECTION 2.1 Form............................................................10
SECTION 2.2 Execution, Authentication and Delivery..........................10
SECTION 2.3 Temporary Notes.................................................11
SECTION 2.4 Registration; Registration of Transfer and Exchange.............12
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes......................13
SECTION 2.6 Persons Deemed Owner............................................14
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest...........14
SECTION 2.8 Cancellation....................................................15
SECTION 2.9 Release of Collateral...........................................16
SECTION 2.10 Book-Entry Notes................................................16
SECTION 2.11 Notices to Clearing Agency......................................17
SECTION 2.12 Definitive Notes................................................17
SECTION 2.13 Tax Treatment...................................................17
ARTICLE III - Covenants.....................................................................18
SECTION 3.1 Payment of Principal and Interest...............................18
SECTION 3.2 Maintenance of Office or Agency.................................18
SECTION 3.3 Money for Payments To Be Held in Trust..........................18
SECTION 3.4 Existence.......................................................20
SECTION 3.5 Protection of Trust Estate......................................20
SECTION 3.6 Opinions as to Trust Estate.....................................20
SECTION 3.7 Performance of Obligations; Servicing of Contracts..............21
SECTION 3.8 Negative Covenants..............................................23
SECTION 3.9 Annual Statement as to Compliance...............................23
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms.............24
SECTION 3.11 Successor or Transferee.........................................25
SECTION 3.12 No Other Business...............................................26
SECTION 3.13 No Borrowing....................................................26
SECTION 3.14 Servicer's Obligations..........................................26
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities...............26
SECTION 3.16 Capital Expenditures............................................26
SECTION 3.17 Removal of Administrator........................................26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.18 Restricted Payments............................................26
SECTION 3.19 Notice of Events of Default....................................27
SECTION 3.20 Further Instruments and Acts...................................27
ARTICLE IV - Satisfaction and Discharge.....................................................27
SECTION 4.1 Satisfaction and Discharge of Indenture.........................27
SECTION 4.2 Application of Trust Money......................................28
SECTION 4.3 Repayment of Moneys Held by Paying Agent........................28
ARTICLE V - Remedies........................................................................29
SECTION 5.1 Events of Default...............................................29
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment..............30
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee........................30
SECTION 5.4 Remedies; Priorities............................................32
SECTION 5.5 Optional Preservation of the Contracts..........................34
SECTION 5.6 Limitation of Suits.............................................34
SECTION 5.7 Unconditional Rights of Noteholders To
Receive Principal and Interest..........................35
SECTION 5.8 Restoration of Rights and Remedies.............................35
SECTION 5.9 Rights and Remedies Cumulative.................................35
SECTION 5.10 Delay or Omission Not a Waiver.................................35
SECTION 5.11 Control by Noteholders.........................................36
SECTION 5.12 Waiver of Past Defaults........................................36
SECTION 5.13 Undertaking for Costs..........................................37
SECTION 5.14 Waiver of Stay or Extension Laws...............................37
SECTION 5.15 Action on Notes................................................37
SECTION 5.16 Performance and Enforcement of Certain Obligations.............37
ARTICLE VI - The Indenture Trustee..........................................................38
SECTION 6.1 Duties of Indenture Trustee.....................................38
SECTION 6.2 Rights of Indenture Trustee.....................................39
SECTION 6.3 Individual Rights of Indenture Trustee..........................40
SECTION 6.4 Indenture Trustee's Disclaimer..................................40
SECTION 6.5 Notice of Defaults..............................................40
SECTION 6.6 Reports by Indenture Trustee to Holders.........................40
SECTION 6.7 Compensation and Indemnity......................................40
SECTION 6.8 Replacement of Indenture Trustee................................41
SECTION 6.9 Successor Indenture Trustee by Merger...........................42
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee........................................................42
SECTION 6.11 Eligibility; Disqualification..................................43
SECTION 6.12 Preferential Collection of Claims Against Issuer...............44
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.13 Pennsylvania Motor Vehicle Sales Finance Act Licenses..........44
ARTICLE VII - Noteholders' Lists and Reports................................................44
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders................................44
SECTION 7.2 Preservation of Information; Communications
to Noteholders..........................................44
SECTION 7.3 Reports by Issuer...............................................45
ARTICLE VIII - Accounts, Disbursements and Releases.........................................45
SECTION 8.1 Collection of Money.............................................45
SECTION 8.2 Trust Accounts..................................................46
SECTION 8.3 General Provisions Regarding Accounts...........................47
SECTION 8.4 Release of Trust Estate.........................................48
SECTION 8.5 Opinion of Counsel..............................................48
ARTICLE IX - Supplemental Indentures........................................................49
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders..........49
SECTION 9.2 Supplemental Indentures with Consent of Noteholders.............50
SECTION 9.3 Execution of Supplemental Indentures............................51
SECTION 9.4 Effect of Supplemental Indenture...............................52
SECTION 9.5 Conformity with Trust Indenture Act.............................52
SECTION 9.6 Reference in Notes to Supplemental Indentures...................52
ARTICLE X - Redemption of Notes............................................................52
SECTION 10.1 Redemption.....................................................52
SECTION 10.2 Form of Redemption Notice......................................53
SECTION 10.3 Notes Payable on Redemption Date...............................54
ARTICLE XI - Miscellaneous..................................................................54
SECTION 11.1 Compliance Certificates and Opinions, etc......................54
SECTION 11.2 Form of Documents Delivered to Indenture Trustee...............56
SECTION 11.3 Acts of Noteholders............................................57
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies.........................................57
SECTION 11.5 Notices to Noteholders; Waiver.................................58
SECTION 11.6 Alternate Payment and Notice Provisions........................58
SECTION 11.7 Conflict with Trust Indenture Act..............................59
SECTION 11.8 Effect of Headings and Table of Contents.......................59
SECTION 11.9 Successors and Assigns.........................................59
SECTION 11.10 Separability..................................................59
SECTION 11.11 Benefits of Indenture.........................................59
SECTION 11.12 Legal Holidays................................................59
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
SECTION 11.13 GOVERNING LAW.................................................59
SECTION 11.14 Counterparts..................................................60
SECTION 11.15 Recording of Indenture........................................60
SECTION 11.16 Trust Obligation..............................................60
SECTION 11.17 No Petition...................................................60
SECTION 11.18 Inspection....................................................60
</TABLE>
SCHEDULE A - Schedule of Contracts
EXHIBIT A-1 - Form of Class A-1 Note
EXHIBIT A-2 - Form of Class A-2 Note
EXHIBIT A-3 - Form of Class A-3 Note
-iv-
<PAGE> 6
INDENTURE dated as of _________, 199__, between ONYX ACCEPTANCE OWNER
TRUST 199__, a Delaware business trust (the "Issuer"), and _________, a banking
corporation, as trustee and not in its individual capacity (the "Indenture
Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's Class A-1 _____%
Auto Loan Backed Notes (the "Class A-1 Notes"), Class A-2 _____% Auto Loan
Backed Notes (the "Class A-2 Notes") and Class A-3 _____% Auto Loan Backed Notes
(the"Class A-3 Notes" and, together with the Class A-1 Notes and the Class A-2
Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (a) any Contracts purchased on the
Closing Date; (b) the monies deposited to the Pre-Funding Account on the Closing
Date; (c) all Contracts purchased on any Subsequent Transfer Date with such
Pre-Funded Amounts and all moneys due on such Contracts on or after the
applicable Subsequent Cutoff Date, in the case of Rule of 78's Contracts, and
all moneys received thereon on and after the applicable Subsequent Transfer
Date, in the case of Simple Interest Contracts; (d) the security interests in
the Financed Vehicles granted by Obligors pursuant to the Contracts and any
other interest of the Issuer in such Financed Vehicles; (e) any proceeds with
respect to the Contracts from claims on any physical damage, credit life or
disability insurance policies covering Financed Vehicles or Obligors; (f) any
proceeds from recourse to Dealers with respect to Contracts in respect of which
the Servicer has determined in accordance with its customary servicing
procedures that eventual payment in full is unlikely; (g) any Financed Vehicle
that shall have secured a Contract and that shall have been acquired by or on
behalf of the Seller, the Servicer, __________ (an affiliate of the Seller) (the
"Company") or the Issuer; (h) all funds on deposit from time to time in the
Trust Accounts, including the Pre-Funded Amount, and in all investments and
proceeds thereof (including all income thereon); (i) the Sale and Servicing
Agreement (including the Issuer's right to cause the Seller to repurchase
Contracts from the Issuer under certain circumstances described therein); and
(j) all present and future claims, demands, causes of action and choses in
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts Contract, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and Contracts, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
<PAGE> 7
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1 (a) Definitions. Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.3(a).
"Administration Agreement" means the Administration Agreement dated as
of _________, 199__, among the Administrator, the Issuer and the Indenture
Trustee.
"Administrator" means Onyx Acceptance Corporation, a Delaware
corporation, or any successor Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
the Sale and Servicing Agreement, the Purchase Agreement, the Administration
Agreement, the Note Depository Agreement, the Certificate Depository Agreement
and other documents and certificates delivered in connection therewith.
-2-
<PAGE> 8
"Book-Entry Notes" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in [The City of New York] [The
City of Los Angeles} are authorized or obligated by law, regulation or executive
order to remain closed.
"Certificate Depository Agreement" has the meaning specified in Section
1.01 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class A-1 Interest Rate" means ____% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class A-1 Notes" means the Class A-1 ____% Auto Loan Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means ____% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class A-2 Notes" means the Class A-2 ____% Auto Loan Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-3 Interest Rate" means ____% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
"Class A-3 Notes" means the Class A-3 ____% Auto Loan Backed Notes,
substantially in the form of Exhibit A-3.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means __________, 199__.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
-3-
<PAGE> 9
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Company" means__________________________________________________.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
____________________; Attention: __________, or at such other address as the
Indenture Trustee may designate from time to time by notice to the Noteholders
and the Issuer, or the principal corporate trust office of any successor
Indenture Trustee at the address designated by such successor Indenture Trustee
by notice to the Noteholders and the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means _______________, a __________ banking
corporation, as Indenture Trustee under this Indenture, or any successor
Indenture Trustee under this Indenture.
-4-
<PAGE> 10
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor on
the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Interest Accrual Period" means, with respect to any Distribution Date
and any class of Notes, the period from and including the second day of the
month preceding the month of such Distribution Date (or, in the case of the
first Distribution Date, the Closing Date) to and including the first day of the
month of such Distribution Date.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2
Interest Rate or the Class A-3 Interest Rate.
"Issuer" means Onyx Acceptance Owner Trust 199_-_ until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" mean a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Note" means a Class A-1 Note, a Class A-2 Note or a Class A-3 Note.
"Note Depository Agreement" means the agreement dated __________, 199__,
among the Issuer, the Administrator, the Indenture Trustee and The Depository
Trust Company, as the initial Clearing Agency, relating to the Notes.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.4.
-5-
<PAGE> 11
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1, and delivered to
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section 11.1
and shall be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made, satisfactory to the Indenture
Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser; provided, that in determining whether
the Holders of the requisite Outstanding Amount of the Notes have given
any request, demand, authorization, direction, notice, consent, or
waiver hereunder or under any Basic Document, Notes owned by the Issuer,
any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes that
the Indenture Trustee knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
or Class of Notes, as applicable, Outstanding at the date of determination.
-6-
<PAGE> 12
"Owner Trustee" means _______________, not in its individual capacity
but solely as Owner Trustee under the Trust Agreement, or any successor Owner
Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Collection Account and the Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer and the Issuer in writing that such action will not result
in a reduction or withdrawal of the then current rating of the Notes.
"Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Issuer, notice of which designation shall be given to the
Indenture Trustee, the Owner Trustee and the Servicer. Any notice required to
be given to a Rating Agency pursuant to this Indenture shall also be given to
Fitch Investors Service, Inc. and Duff & Phelps Credit Rating Company, although
neither shall be deemed to be a Rating Agency for any purposes of this
Indenture.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the first day of the calendar month in which such
Distribution Date or Redemption Date occurs or, if Definitive Notes have been
issued pursuant to Section 2.12, the 15th day of the preceding month.
-7-
<PAGE> 13
"Redemption Date" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section
10.1(c), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.1(a) or (c), as applicable, or (b) in the case of a redemption of
Notes pursuant to Section 10.1(b), the Distribution Date specified in Section
5.8(b) of the Sale and Servicing Agreement on which the Indenture Trustee shall
withdraw any amount remaining in the Pre-Funding Account and deposit the
applicable amount thereof payable to any Class of Notes in the Distribution
Account.
"Redemption Price" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a) or (b), an amount equal to the unpaid principal
amount of the Notes redeemed plus accrued and unpaid interest thereon at the
weighted average of the Interest Rates for each Class of Notes being so redeemed
to but excluding the Redemption Date, or (b) in the case of a payment made to
Noteholders pursuant to Section 10.1(c), the amount on deposit in the
Distribution Account, but not in excess of the amount specified in clause (a)
above.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of __________, 199__, among the Issuer, Onyx Acceptance Financial
Corporation, as Seller, and Onyx Acceptance Corporation, as Servicer.
"Schedule of Contracts" means the listing of the Contracts set forth in
Schedule A (which Schedule may be in the form of microfiche), as supplemented as
of each Subsequent Transfer Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall mean Onyx Acceptance Financial Corporation, in its
capacity as seller under the Sale and Servicing Agreement, and its successor in
interest.
"Servicer" shall mean Onyx Acceptance Corporation in its capacity as
servicer under the Sale and Servicing Agreement, and any Successor Servicer
thereunder.
"State" means any one of the 50 States of the United States of America
or the District of Columbia.
-8-
<PAGE> 14
"Successor Servicer" has the meaning specified in Section 3.7(e).
"Trust Estate" means all money, instruments, rights and other property
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including, without
limitation, all property and interests Granted to the Indenture Trustee pursuant
to the Granting Clause), including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.3 Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
-9-
<PAGE> 15
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
The Notes
SECTION 2.1 Form. The Class A-1 Notes, the Class A-2 Notes and the Class
A-3 Notes, in each case together with the Indenture Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit A-1,
Exhibit A-2 and Exhibit A-3, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution thereof. Any portion of the text of any Note may be
set forth on the reverse thereof, with an appropriate reference thereto on the
face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit A-1, Exhibit A-2 and Exhibit A-3 are part of the
terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any
-10-
<PAGE> 16
of them have ceased to hold such offices prior to the authentication and
delivery of such Notes or did not hold such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of
$__________, Class A-2 Notes for original issue in an aggregate principal amount
of $__________and Class A-3 Notes for original issue in an aggregate principal
amount of $__________. The aggregate principal amount of Class A-1 Notes, Class
A-2 Notes and Class A-3 Notes outstanding at any time may not exceed such
respective amounts except as provided in Section 2.5.
Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Notes in the minimum denomination $1,000.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.3 Temporary Notes. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes that are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture Trustee shall authenticate and deliver in exchange
therefor, a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee initially shall be the "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly
-11-
<PAGE> 17
appoint a successor or, if it elects not to make such an appointment, assume the
duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes of the same Class in any authorized
denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
-12-
<PAGE> 18
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to such Note.
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
-13-
<PAGE> 19
SECTION 2.6 Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest.
(a) The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
shall accrue interest at the Class A-1 Interest Rate, the Class A-2 Interest
Rate and the Class A-3 Interest Rate, respectively, as set forth in Exhibits
A-1, A-2 and A-3, respectively, and such interest shall be payable on each
Distribution Date as specified therein, subject to Section 3.01. Any installment
of interest or principal, if any, payable on any Note that is punctually paid or
duly provided for by the Issuer on the applicable Distribution Date shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes) is
registered on the Record Date by check mailed first-class postage prepaid to
such Person's address as it appears on the Note Register on such Record Date,
except that, unless Definitive Notes have been issued pursuant to Section 2.12,
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payment will
be made by wire transfer in immediately available funds to the account
designated by such nominee and except for the final installment of principal
payable with respect to such Note on a Distribution Date or on the applicable
Final Scheduled Distribution Date (and except for the Redemption Price for any
Note called for redemption pursuant to Section 10.01(a)), which shall be payable
as provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit
A-1, Exhibit A-2 and Exhibit A-3. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable, if not previously
paid, on the date on which an Event of Default shall have occurred and be
continuing, if the Indenture Trustee or the Holders of Notes representing not
less than a majority of the Outstanding Amount of the Notes have declared the
Notes to be immediately due and payable in the manner provided in Section 5.2.
All principal payments on each Class of Notes shall be made pro rata to the
Noteholders of such Class entitled thereto. The Indenture Trustee shall notify
the Person in whose name a Note is registered at the close of business on the
Record Date preceding the Distribution Date on which the Issuer expects that the
final installment of principal of and interest on such Note will be paid. Such
notice shall be mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.2.
-14-
<PAGE> 20
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to each Noteholder a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.8 Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Order that they
be destroyed or returned to it; provided, that such Issuer Order is timely and
the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.9 Release of Collateral. Subject to Section 11.1 and the terms
of the Basic Documents, the Indenture Trustee shall release property from the
lien of this Indenture only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion of Counsel in
lieu of such Independent Certificates to the effect that the TIA does not
require any such Independent Certificates.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Issuer. The Book-Entry Notes shall be registered initially
on the Note Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and
-15-
<PAGE> 21
interest on the Notes and the giving of instructions or directions
hereunder) as the sole holder of the Notes, and shall have no obligation
to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12,
the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect from
Note Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default or a Servicer Default, Owners of the
Book-Entry Notes representing beneficial interests aggregating at least a
majority of the Outstanding Amount of such Notes advise the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interests of such Note Owners, then the Clearing Agency
shall notify all Note Owners and the Indenture Trustee of the occurrence of such
event and of the availability of Definitive Notes to Note Owners requesting the
same. Upon surrender to the Indenture Trustee of the typewritten Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the Definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
-16-
<PAGE> 22
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
SECTION 2.13 Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Trust Estate. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of a Note
(and each Note Owner by its acceptance of an interest in the applicable
Book-Entry Note), agree to treat the Notes for federal, state and local income,
single business and franchise tax purposes as indebtedness of the Issuer.
ARTICLE III
Covenants
SECTION 3.1 Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.2(c), the Issuer will cause to be distributed all amounts
on deposit in the Distribution Account on a Distribution Date deposited therein
pursuant to the Sale and Servicing Agreement (i) for the benefit of the Class
A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class A-2
Notes, to the Class A-2 Noteholders, and (iii) for the benefit of the Class A-3
Notes, to the Class A-3 Noteholders. Amounts properly withheld under the Code by
any Person from a payment to any Noteholder of interest and/or principal shall
be considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.2 Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, The City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Indenture Trustee to serve
as its agent for the foregoing purposes. The Issuer will give prompt written
notice to the Indenture Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such office or agency or shall fail to furnish the Indenture
Trustee with the address thereof, such surrenders, notices and demands may be
made or served at the Corporate Trust Office, and the Issuer hereby appoints the
Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
SECTION 3.3 Money for Payments To Be Held in Trust. As provided in
Section 8.2(a )and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Distribution Account pursuant to Section 8.2(c) shall be made on behalf
of the Issuer by the Indenture Trustee or by another Paying Agent, and
-17-
<PAGE> 23
no amounts so withdrawn from the Collection Account and the Distribution
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto, and (unless the Paying Agent is the Indenture
Trustee) shall promptly notify the Indenture Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
-18-
<PAGE> 24
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).
SECTION 3.4 Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.5 Protection of Trust Estate. The Issuer will from time to
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
-19-
<PAGE> 25
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.5.
SECTION 3.6 Opinions as to Trust Estate.
(a) On the Closing Date, the Issuer shall furnish to the Indenture
Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the lien and security interest of this Indenture and reciting the
details of such action, or stating that, in the opinion of such counsel, no such
action is necessary to make such lien and security interest effective.
(b) On or before __________ in each calendar year, beginning in 199__,
the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until in the following calendar year.
SECTION 3.7 Performance of Obligations; Servicing of Contracts.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially,
-20-
<PAGE> 26
the Issuer has contracted with the Servicer and the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate, including but
not limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Indenture Trustee
or the Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect of such default. If
a Servicer Default shall arise from the failure of the Servicer to perform any
of its duties or obligations under the Sale and Servicing Agreement with respect
to the Contracts, the Issuer shall take all reasonable steps available to it to
remedy such failure.
(e) As promptly as possible after the giving of notice of termination to
the Servicer of the Servicer's rights and powers pursuant to Section 8.1 of the
Sale and Servicing Agreement, the Issuer shall appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
by a written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer has not been appointed and accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may resign as the Servicer by giving
written notice of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new servicer enters into a servicing agreement with the Issuer
as provided below. Upon delivery of any such notice to the Issuer, the Issuer
shall obtain a new servicer as the Successor Servicer under the Sale and
Servicing Agreement. Any Successor Servicer other than the Indenture Trustee
shall (i) be an established financial institution having a net worth of not less
than $50,000,000 and whose regular business includes the servicing of Contracts
and (ii) enter into a servicing agreement with the Issuer having substantially
the same provisions as the provisions of the Sale and Servicing Agreement
applicable to the Servicer. If within 30 days after the delivery of the notice
referred to above, the Issuer shall not have obtained such a new servicer, the
Indenture Trustee may appoint, or may petition a court of competent jurisdiction
to appoint, a Successor Servicer. In connection with any such appointment, the
Indenture Trustee may make such arrangements for the compensation of such
successor as it and such successor shall agree, subject to the limitations set
forth below and in the Sale and Servicing Agreement, and in accordance with
Section 8.2 of the Sale and Servicing Agreement, the Issuer shall enter into an
agreement with such successor for the servicing of the Contracts (such agreement
to be in form and substance satisfactory to the Indenture Trustee). If the
Indenture Trustee shall
-21-
<PAGE> 27
succeed to the Servicer's duties as servicer of the Contracts as provided
herein, it shall do so in its individual capacity and not in its capacity as
Indenture Trustee and, accordingly, the provisions of Article VI hereof shall be
inapplicable to the Indenture Trustee in its duties as the successor to the
Servicer and the servicing of the Contracts. In case the Indenture Trustee shall
become successor to the Servicer under the Sale and Servicing Agreement, the
Indenture Trustee shall be entitled to appoint as Servicer any one of its
affiliates, provided that it shall be fully liable for the actions and omissions
of such affiliate in such capacity as Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee. As soon as a Successor Servicer is appointed, the Issuer shall notify
the Indenture Trustee of such appointment, specifying in such notice the name
and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the
prior written consent of the Indenture Trustee or the Holders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral (except to the
extent otherwise provided in the Sale and Servicing Agreement) or the Basic
Documents, or waive timely performance or observance by the Servicer or the
Seller under the Sale and Servicing Agreement; and (ii) that any such amendment
shall not (A) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, distributions that are required to be made for the benefit
of the Noteholders or (B) reduce the aforesaid percentage of the Notes that is
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes. If any such amendment, modification, supplement or
waiver shall be so consented to by the Indenture Trustee or such Holders, the
Issuer agrees, promptly following a request by the Indenture Trustee to do so,
to execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture, the Purchase
Agreement or the Sale and Servicing Agreement, sell, transfer, exchange
or otherwise dispose of any of the properties or assets of the Issuer,
including those included in the Trust Estate, unless directed to do so
by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
-22-
<PAGE> 28
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on any of the Financed Vehicles
and arising solely as a result of an action or omission of the related
Obligor) or (C) permit the lien of this Indenture not to constitute a
valid first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Trust Estate.
SECTION 3.9 Annual Statement as to Compliance. The Issuer will deliver
to the Indenture Trustee, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year 199__), an Officer's Certificate
stating, as to the Authorized Officer signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the
Indenture Trustee, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
-23-
<PAGE> 29
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(b) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(c) The Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filing required by the
Exchange Act).
(d) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes, and (E)
expressly agrees by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
-24-
<PAGE> 30
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
SECTION 3.11 Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Onyx Acceptance Owner Trust 199_-_ will
be released from every covenant and agreement of this Indenture to be observed
or performed on the part of the Issuer with respect to the Notes immediately
upon the delivery of written notice to the Indenture Trustee stating that Onyx
Acceptance Owner Trust 199_-_ is to be so released.
SECTION 3.12 No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto. After the Funding Period, the Issuer shall
not fund the purchase of any new Contracts.
SECTION 3.13 No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes and the Fixed Value Securities as provided in
Section 2.4 of the Sale and Servicing Agreement.
SECTION 3.14 Servicer's Obligations. The Issuer shall cause the Servicer
to comply with Sections _________ of the Sale and Servicing Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse
-25-
<PAGE> 31
or otherwise become contingently liable, directly or indirectly, in connection
with the obligations, stocks or dividends of, or own, purchase, repurchase or
acquire (or agree contingently to do so) any stock, obligations, assets or
securities of, or any other interest in, or make any capital contribution to,
any other Person.
SECTION 3.16 Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17 Removal of Administrator. So long as any Notes are
Outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
SECTION 3.18 Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, (x)
distributions to the Servicer, the Owner Trustee and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under,
the Sale and Servicing Agreement or the Trust Agreement and (y) payments to the
Indenture Trustee pursuant to Section 1(a)(ii) of the Administration Agreement.
The Issuer will not, directly or indirectly, make payments to or distributions
from the Collection Account except in accordance with this Indenture and the
Basic Documents.
SECTION 3.19 Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder, each default on the part of the Servicer or the Seller of its
obligations under the Sale and Servicing Agreement and each default on the part
of the Company or the Seller of its obligations under the Purchase Agreement.
SECTION 3.20 Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the
-26-
<PAGE> 32
rights of the Indenture Trustee under Section 6.07 and the obligations of the
Indenture Trustee under Section 4.2), and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when:
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.5 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid
to the Issuer or discharged from such trust, as provided in
Section 3.3) have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable,
b. will become due and payable at the Class A-3 Final
Scheduled Distribution Date within one year, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for
the giving of notice of redemption by the Indenture
Trustee in the name, and at the expense, of the Issuer,
and the Issuer, in the case of a., b. or c. above, has
irrevocably deposited or caused to be irrevocably
deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United
States of America (which will mature prior to the date
such amounts are payable), in trust for such purpose, in
an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to
the Indenture Trustee for cancellation when due to the
applicable Final Scheduled Distribution Date or
Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1(a)), as the case may
be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.1(a) and, subject to
Section 11.2, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.
-27-
<PAGE> 33
SECTION 4.2 Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.3 Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.3 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.1 Events of Default. "Event of Default,"wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition
in respect of which such misrepresentation or warranty was incorrect
shall not have been eliminated or otherwise cured, for a period of 30
days after there shall have been given, by registered or certified mail,
to the Issuer by the Indenture Trustee or to the Issuer and the
Indenture Trustee by the Holders of at least 25% of the Outstanding
Amount of the Notes, a written notice specifying
-28-
<PAGE> 34
such default or incorrect representation or warranty and requiring it to
be remedied and stating that such notice is a notice of Default
hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or
for any substantial part of the Trust Estate, or ordering the winding-up
or liquidation of the Issuer's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by the Issuer to the entry of
an order for relief in an involuntary case under any such law, or the
consent by the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust
Estate, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of any action by the
Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days
after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (iii), its status and what action
the Issuer is taking or proposes to take with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
-29-
<PAGE> 35
(A) all payments of principal of and interest on all Notes
and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
(a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will, upon demand of the Indenture Trustee,
pay to the Indenture Trustee, for the benefit of the Holders of the Notes, the
whole amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest at
the rate borne by the Notes and in addition thereto such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.4, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any
-30-
<PAGE> 36
covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property; and
any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders
to make payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders, to pay to the Indenture Trustee such amounts as shall
be sufficient to cover reasonable compensation to the Indenture Trustee,
each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, and all other expenses
-31-
<PAGE> 37
and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of
negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
SECTION 5.4 Remedies; Priorities.
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee may do one or more of the following (subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Noteholders; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law; provided, however, that the
Indenture Trustee may not sell or otherwise liquidate the Trust
-32-
<PAGE> 38
Estate following an Event of Default, other than an Event of Default
described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of
such sale or liquidation distributable to the Noteholders are sufficient
to discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the
Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and payable, and the
Indenture Trustee obtains the consent of Holders of 66-2/3% of the
Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee
may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section
6.07;
SECOND: to the Servicer, any unpaid Servicing Fee;
THIRD: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for interest;
FOURTH: to Noteholders for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal;
FIFTH: to the Spread Account to be applied in accordance with the
Insurance Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail
-33-
<PAGE> 39
to each Noteholder and the Indenture Trustee a notice that states the record
date, the payment date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Contracts. If the Notes have
been declared to be due and payable under Section 5.2 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.6 Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount
of the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities
to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
-34-
<PAGE> 40
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.8 Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
-35-
<PAGE> 41
(ii) subject to the express terms of Section 5.4, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be
by Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Outstanding Amount
of the Notes to sell or liquidate the Trust Estate shall be of no force
and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section,
subject to Section 6.1, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
SECTION 5.12 Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.2, the
Holders of Notes representing not less than a majority of the Outstanding Amount
of the Notes may waive any past Default or Event of Default and its consequences
except a Default (a) in the payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof that cannot be
modified or amended without the consent of the Holder of each Note. In the case
of any such waiver, the Issuer, the Indenture Trustee and the Holders of the
Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13 Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment
-36-
<PAGE> 42
of principal of or interest on any Note on or after the respective due dates
expressed in such Note and in this Indenture (or, in the case of redemption, on
or after the Redemption Date).
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.4(b).
SECTION 5.16 Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to do so and
at the Administrator's expense, the Issuer shall take all such lawful action as
the Indenture Trustee may request to compel or secure the performance and
observance by the Seller and the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement or by the Seller [or the Company, as applicable,] of [its] [each of
their] obligations under or in connection with the Purchase Agreement, and to
exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer under or in connection with the Sale and Servicing Agreement to
the extent and in the manner directed by the Indenture Trustee, including the
transmission of notices of default on the part of the Seller or the Servicer
thereunder and the institution of legal or administrative actions or proceedings
to compel or secure performance by the Seller or the Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone, confirmed in writing promptly thereafter) of the Holders of 66-2/3%
of the Outstanding Amount of the Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Seller or the Servicer
under or in connection with the Sale and Servicing Agreement, or against [the
Company or] the Seller under or in connection with the Purchase Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Seller or the Servicer[, or the Company as the case may
be], of each of their obligations to the Issuer thereunder and to give any
consent, request,
-37-
<PAGE> 43
notice, direction, approval, extension, or waiver under the
Sale and Servicing Agreement or the Purchase Agreement, as the case may be, and
any right of the Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
SECTION 6.1 Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
-38-
<PAGE> 44
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.2 Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that such action or omission by the
Indenture Trustee does not constitute willful misconduct, negligence or bad
faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
-39-
<PAGE> 45
SECTION 6.3 Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement of
the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of principal of
or interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.7 Compensation and Indemnity. The Issuer shall or shall cause
the Administrator to pay to the Indenture Trustee from time to time reasonable
compensation for its services. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall or shall cause the Administrator to reimburse the Indenture Trustee for
all reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer shall or shall cause the Administrator to indemnify the Indenture
Trustee against any and all loss, liability or expense (including attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer and the Administrator promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall or shall cause the Administrator to
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall or shall cause the Administrator to pay the fees and expenses
of such counsel. Neither the Issuer nor the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.
-40-
<PAGE> 46
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.1(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.8 Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.8. The Indenture Trustee may resign
at any time by so notifying the Issuer. The Holders of a majority in Outstanding
Amount of the Notes may remove the Indenture Trustee by so notifying the
Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
-41-
<PAGE> 47
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section 6.7
shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9 Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Noteholders, such title
to the Trust Estate, or any part hereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Indenture Trustee may consider necessary or desirable. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in
-42-
<PAGE> 48
which any particular act or acts are to be performed the Indenture
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations (including
the holding of title to the Trust Estate or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of Baa3 or better by Moody's or shall
otherwise be acceptable to Moody's. The Indenture Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
-43-
<PAGE> 49
SECTION 6.13 Pennsylvania Motor Vehicle Sales Finance Act Licenses. The
Indenture Trustee shall use its best efforts to maintain the effectiveness of
all licenses required under the Pennsylvania Motor Vehicle Sales Finance Act in
connection with this Indenture and the transactions contemplated hereby until
the lien and security interest of this Indenture shall no longer be in effect in
accordance with the terms hereof.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.2 Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.1 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.1 upon receipt of
a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
SECTION 7.3 Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the
-44-
<PAGE> 50
Commission may from time to time by rules and regulations prescribe)
that the Issuer may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with the rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.3(a) and by rules and regulations prescribed from time to
time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.4 Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each February 1 beginning with February 1, 199__,
the Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
Contract by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.2 Trust Accounts.
-45-
<PAGE> 51
(a) On or prior to the Closing Date, the Issuer shall cause the Servicer
to establish and maintain, in the name of the Indenture Trustee, for the benefit
of the Noteholders and the Certificateholders, the Trust Accounts as provided in
Section 4.1 of the Sale and Servicing Agreement.
(b) On or before each Distribution Date, the Total Distribution Amount
with respect to the preceding Collection Period will be deposited in the
Collection Account as provided in Section 4.1 of the Sale and Servicing
Agreement. On or before each Distribution Date, all amounts required to be
deposited in the Distribution Account with respect to the preceding Collection
Period pursuant to Section 4.3 of the Sale and Servicing Agreement will be
transferred from the Collection Account to the Distribution Account.
(c) On each Distribution Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Distribution Account in the
following amounts and in the following order of priority (except as otherwise
provided in Section 5.4(b)):
(i) to the Servicer, the Servicing Fee (as defined in the Sale
and Servicing Agreement);
(ii) to the Holders of each class of Notes, the interest accrued
on each class of Notes during the related Collection Period, on a pro
rata basis based on the interest accrued on each class of Notes;
(iii) only to the extent of funds withdrawn from the Pre-Funding
Account and deposited in the Distribution Account by the Indenture
Trustee:
(A) if the amount of such funds is equal to or less than
$_____, to the Holders of the Class A-1 Notes on
account of principal up to the Outstanding Amount
thereof, then to the Holders of the Class A-2 Notes up
to the Outstanding Amount thereof, and then to the
Holders of the Class A-3 Notes up to the Outstanding
Amount thereof; and
(B) if the amount of such funds is greater than $_____, pro
rata to the Holders of the Class A-1 Notes, the Holders
of the Class A-2 Notes and the Holders of the Class A-3
Notes based on the initial Outstanding Amount of each
such Class, in each case to reduce the Outstanding
Amount of each such Class;
(iv) to the holders of Class A-1 Notes, the Principal
Distribution, until the Outstanding Amount of the Class A-1 Notes is
reduced to zero;
(v) to the Holders of Class A-2 Notes, the remaining Principal
Distribution (after giving effect to the payment to the Holders of Class
A-1 Notes described in clause (iv) above), until the Outstanding Amount
of the Class A-2 Notes is reduced to zero;
(vi) to the Holders of Class A-3 Notes, the remaining Principal
Distribution (after giving effect to the payment to the Holders of Class
A-1 Notes and Class A-2 Notes described in clauses (iv) and (v)
above), until the Outstanding Amount of the Class A-3 Notes is reduced
to zero;
(vii) to the Insurer, any amounts owing to the Insurer under the
Insurance Agreement;
(viii) to the Spread Account, the amount, if any, required to
increase the amount therein to its required level;
(ix) on each Distribution Date through the Accelerated Principal
Termination Date, from the amount remaining in the Distribution Account
and together with amounts, if any, available from the Spread Account to
make such payment in accordance with the Insurance Agreement, to the
holders of the Class A-1 Notes, the Accelerated Principal Distribution,
until the Outstanding Amount of the Class A-1 Notes is reduced to zero;
and
(x) to the Spread Account to be applied in accordance with the
Insurance Agreement.
-46-
<PAGE> 52
SECTION 8.3 General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Eligible Investments and reinvested by the Indenture Trustee upon
Issuer Order, subject to the provisions of Section 4.1(c) of the Sale and
Servicing Agreement. All income or other gain from investments of moneys
deposited in the Trust Accounts shall be deposited by the Indenture Trustee in
the Collection Account, and any loss resulting from such investments shall be
charged to such account. The Issuer will not direct the Indenture Trustee to
make any investment of any funds or to sell any investment held in any of the
Trust Accounts unless the security interest Granted and perfected in such
account will continue to be perfected in such investment or the proceeds of such
sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m. Eastern Time (or such other time as
-47-
<PAGE> 53
may be agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a
Default or Event of Default shall have occurred and be continuing with respect
to the Notes but the Notes shall not have been declared due and payable pursuant
to Section 5.2 or (iii) if such Notes shall have been declared due and payable
following an Event of Default, amounts collected or Contract from the Trust
Estate are being applied in accordance with Section 5.5 as if there had not been
such a declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
SECTION 8.4 Release of Trust Estate.
(a) Subject to the payment of its fees and expenses pursuant to Section
6.7, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture Trustee
as provided in this Article VIII shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.7 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.4(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
(c) Each Noteholder, by the acceptance of a Note, acknowledges that
promptly following the Closing Date and each Subsequent Transfer Date the
Indenture Trustee shall release the lien of this Indenture on each Fixed Value
Payment assigned by the Issuer to the Company, and consents to such release.
SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.4(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, except in connection with any action
contemplated by Section 8.4(c), as a condition to such action, an Opinion of
Counsel, in form and substance satisfactory to the Indenture Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely,
-48-
<PAGE> 54
without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such action.
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter into
one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with
any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising under
this Indenture or in any supplemental indenture; provided, that such
action shall not adversely affect the interests of the Holders of the
Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any
-49-
<PAGE> 55
similar federal statute hereafter enacted and to add to this Indenture
such other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Holders of
not less than a majority of the Outstanding Amount of the Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provisions of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place of
payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after
the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
-50-
<PAGE> 56
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.4;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by
-51-
<PAGE> 57
this Indenture. The Indenture Trustee may, but shall not be obligated to, enter
into any such supplemental indenture that affects the Indenture Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
SECTION 10.1 Redemption.
(a) The Class A-3 Notes are subject to redemption in whole, but not in
part, at the direction of the Servicer pursuant to Section 10.1 of the Sale
and Servicing Agreement, on any Distribution Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section
10.1, for a purchase price equal to the Redemption Price; provided, that the
Issuer has available funds sufficient to pay the Redemption Price. The Servicer
or the Issuer shall furnish the Rating Agencies notice of such redemption. If
the Class A-3 Notes are to be redeemed pursuant to this Section 10.1(a), the
Servicer or the Issuer shall furnish notice of such election to the Indenture
Trustee not later than 20 days prior to the Redemption Date and the Issuer shall
deposit by 10:00 A.M. New York City time on the Redemption Date with the
Indenture Trustee in the Distribution Account the Redemption Price of the Class
A-3 Notes to be redeemed, whereupon all such Class A-3
-52-
<PAGE> 58
Notes shall be due and payable on the Redemption Date upon the furnishing of a
notice complying with Section 10.2 to each Holder of the Notes.
(b) If (x) the Pre-Funded Amount has not been reduced to zero on the
Distribution Date on which the Funding Period ends (or, if the Funding Period
does not end on a Distribution Date, on the first Distribution Date following
the end of the Funding Period) or (y) the Pre-Funded Amount has been reduced to
$________ or less on any Distribution Date, in either case after giving effect
to any reductions in the Pre-Funded Amount on such Distribution Date pursuant to
[Section 5.8(a)] of the Sale and Servicing Agreement, one or more classes of
Notes then Outstanding will be redeemed, in whole or in part, as described in
Section 8.02(c)(ii) in a principal amount described therein.
(c) In the event that the assets of the Trust are sold pursuant to
Section 8.2 of the Trust Agreement, all amounts on deposit in the Distribution
Account shall be paid to the Noteholders up to the Outstanding Amount of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this Section 10.1(c), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Indenture Trustee
not later than 20 days prior to the Redemption Date, whereupon all such amounts
shall be payable on the Redemption Date.
SECTION 10.2 Form of Redemption Notice.
(a) Notice of redemption under Section 10.1(a) shall be given by the
Indenture Trustee by first-class mail, postage prepaid, or by facsimile mailed
or transmitted not later than 10 days prior to the applicable Redemption Date to
each Holder of Notes, as of the close of business on the Record Date preceding
the applicable Redemption Date, at such Holder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
-53-
<PAGE> 59
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.2).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
(b) Prior notice of redemption under Sections 10.1(b) and 10.1(c) is not
required to be given to Noteholders.
SECTION 10.3 Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.2 (in the case of redemption pursuant to Section 10.1(a)), on the
Redemption Date become due and payable at the Redemption Price and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.1 Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and
the definitions herein relating thereto;
-54-
<PAGE> 60
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of any signer thereof
as to the matters described in clause (i) above, the Issuer shall also deliver
to the Indenture Trustee an Independent Certificate as to the same matters, if
the fair value to the Issuer of the securities to be so deposited and of all
other such securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this clause (ii), is 10%
or more of the Outstanding Amount of the Notes, but such a certificate need not
be furnished with respect to any securities so deposited, if the fair value
thereof to the Issuer as set forth in the related Officer's Certificate is less
than $25,000 or less than one percent of the Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released from the
lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such release)
of the property or securities proposed to be released and stating that in the
opinion of such person the proposed release will not impair the security under
this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of any signer thereof
as to the matters described in clause (iii) above, the Issuer shall also furnish
to the Indenture Trustee an Independent Certificate as to the same matters if
the fair value of the property or securities and of all other property, other
than property as contemplated by clause (v) below or securities released from
the lien of this Indenture since the commencement of the then-current calendar
year, as set forth in the certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the
-55-
<PAGE> 61
Notes, but such certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the related
Officer's Certificate is less than $25,000 or less than one percent of the then
Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.10 or any other provision of this Section,
the Issuer may, without compliance with the requirements of the other provisions
of this Section, (A) collect, liquidate, sell or otherwise dispose of Contracts,
Eligible Investment Contracts and Financed Vehicles as and to the extent
permitted or required by the Basic Documents, (B) make cash payments out of the
Trust Accounts as and to the extent permitted or required by the Basic Documents
and (C) convey to the Seller each Fixed Value Payment in accordance with Section
8.04(c), so long as the Issuer shall deliver to the Indenture Trustee every six
months, commencing December 15, 199__, an Officer's Certificate of the Issuer
stating that all the dispositions of Collateral described in clauses (A), (B) or
(C) above that occurred during the preceding six calendar months were in the
ordinary course of the Issuer's business and that the proceeds thereof were
applied in accordance with the Basic Documents.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Seller, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective
-56-
<PAGE> 62
date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.3 Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer
-57-
<PAGE> 63
addressed to: Onyx Acceptance Owner Trust 199_-_, in care of
_______________, Attention of __________, or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer
or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
Moody's, at the following address: Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007, (ii) in the
case of Standard & Poor's, at the following address: Standard & Poor's Ratings
Group, 26 Broadway (15th Floor), New York, New York 10004, Attention of Asset
Backed Surveillance Department, (iii) in the case of Fitch's Investors Service,
Inc., at the following address: One State Street Plaza, New York, N.Y. 10004,
and (iv) in the case of Duff & Phelps Credit Rating Company at the following
address: 55 E. Monroe Street (35th Floor), Chicago, Illinois 60603; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
-58-
<PAGE> 64
SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 11.7 Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10 Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12 Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE
-59-
<PAGE> 65
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17 No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Issuer, or join in any
institution against the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Basic Documents.
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and
-60-
<PAGE> 66
Independent certified public accountants, all at such reasonable times and as
often as may be reasonably requested. The Indenture Trustee shall and shall
cause its representatives to hold in confidence all such information except to
the extent disclosure may be required by law (and all reasonable applications
for confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
ONYX ACCEPTANCE OWNER TRUST 199_-_
By: ____________________________________
not in its individual capacity but
solely as Owner Trustee
By:_____________________________________
Name:___________________________________
Title:__________________________________
By: ____________________________________
not in its individual capacity but
solely as Indenture Trustee
By:_____________________________________
Name:___________________________________
Title:__________________________________
-61-
<PAGE> 67
STATE OF CALIFORNIA
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared , known to me to be the person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said ONYX ACCEPTANCE OWNER
TRUST 199_-_, a Delaware business trust, and that such person executed the same
as the act of said business trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
199__.
_________________________________________
Notary Public in and for the State of
California
(Seal)
My commission expires:
______________________
STATE OF CALIFORNIA
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared , known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of ,
a banking corporation, and that such person executed the same as the act of
said corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
199__.
_________________________________________
Notary Public in and for the State of
California
(Seal)
My commission expires:
______________________
-62-
<PAGE> 68
SCHEDULE A
(To be Provided at the Closing and Supplemented on each Subsequent
Transfer Date on which Subsequent Contracts are transferred to the Trust)
-1-
<PAGE> 69
EXHIBIT A-1
(FORM OF CLASS A-1 NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
$____________
No._____ CUSIP NO._______
ONYX ACCEPTANCE OWNER TRUST 199_-_
CLASS A-1 ____% AUTO LOAN BACKED NOTES
Onyx Acceptance Owner Trust 199_-_, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of _______________ DOLLARS ($__________)
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL
AMOUNT OF NOTE] and the denominator of which is $__________ by (ii) the
aggregate amount, if any, payable from the Distribution Account in respect of
principal on the Class A-1 Notes pursuant to Section 3.1 of the Indenture dated
as of __________, 199__, between the Issuer and __________, a __________ banking
corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of the Distribution Date (the "Class A-1 Final Scheduled
Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. Capitalized terms used but not defined herein are defined in
Article I of the Indenture, which also contains rules as to construction that
shall be applicable herein.
A-1-1
<PAGE> 70
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.1 of the Indenture. Interest on this Note will accrue for
each Distribution Date from the second day of the month preceding the month of
such Distribution Date (in the case of the first Distribution Date, from the
Closing Date) to and including the first day of the month of such Distribution
Date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
ONYX ACCEPTANCE OWNER TRUST 199_-_
By:______________________________________
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
By:___________________________________
Authorized Signatory
A-1-2
<PAGE> 71
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
By:______________________________________
not in its individual capacity but
solely as Indenture Trustee,
By:______________________________________
Authorized Signatory
A-1-3
<PAGE> 72
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 ____% Auto Loan Backed Notes (herein called the
"Class A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
second day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing __________, 199__.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-1 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of the Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable in
the manner provided in Section 5.2 of the Indenture. All principal payments on
the Class A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the
A-1-4
<PAGE> 73
Indenture Trustee's principal Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located in The City of
New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Class A-1 Notes may be redeemed in
part on the Distribution Date on which the Funding Period ends (or on the
Distribution Date immediately following the last day of the Funding Period, if
the Funding Period does not end on a Distribution Date), in the manner and to
the extent described in the Indenture and the Sale and Servicing Agreement, in
the event that any amount remains on deposit in the Pre-Funding Account after
giving effect to the purchase of all Contracts, including any such purchase on
such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
A-1-5
<PAGE> 74
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
A-1-6
<PAGE> 75
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of in its individual capacity, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal of or interest on this Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-1-7
<PAGE> 76
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:_______
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints , attorney, to transfer said Note on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:_________________
Signature Guaranteed:
_______________________
*/ NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
A-1-8
<PAGE> 77
EXHIBIT A-2
(FORM OF CLASS A-2 NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
$____________
No._____ CUSIP NO._______
ONYX ACCEPTANCE OWNER TRUST 199_-_
CLASS A-2 ____% AUTO LOAN BACKED NOTES
Onyx Acceptance Owner Trust 199_-_, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of _______________ DOLLARS ($__________)
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL
AMOUNT OF NOTE] and the denominator of which is $__________ by (ii) the
aggregate amount, if any, payable from the Distribution Account in respect of
principal on the Class A-2 Notes pursuant to Section 3.1 of the Indenture dated
as of __________, 199__, between the Issuer and __________, a __________ banking
corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of the Distribution Date (the "Class A-2 Final Scheduled
Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. No payments of principal on the Class A-2 Notes shall be made
until the Class A-1 Notes have been paid in full. Capitalized terms used but not
defined herein are defined in Article I of the Indenture, which also contains
rules as to construction that shall be applicable herein.
A-2-1
<PAGE> 78
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.1 of the Indenture. Interest on this Note will accrue for
each Distribution Date from the second day of the month preceding the month of
such Distribution Date (in the case of the first Distribution Date, from the
Closing Date) to and including the first day of the month of such Distribution
Date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
ONYX ACCEPTANCE OWNER TRUST 199_-_
By:______________________________________
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
By:______________________________________
Authorized Signatory
A-2-2
<PAGE> 79
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
By:______________________________________
not in its individual capacity but
solely as Indenture Trustee,
By:______________________________________
Authorized Signatory
A-2-3
<PAGE> 80
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 ____% Auto Loan Backed Notes (herein called the
"Class A-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
second day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing __________, 199__.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-2 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of the Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable in
the manner provided in Section 5.2 of the Indenture. All principal payments on
the Class A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the
A-2-4
<PAGE> 81
Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes located in The City of New
York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Class A-2 Notes may be redeemed in
part on the Distribution Date on which the Funding Period ends (or on the
Distribution Date immediately following the last day of the Funding Period, if
the Funding Period does not end on a Distribution Date), in the manner and to
the extent described in the Indenture and the Sale and Servicing Agreement, in
the event that any amount remains on deposit in the Pre-Funding Account after
giving effect to the purchase of all Contracts, including any such purchase on
such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
A-2-5
<PAGE> 82
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
A-2-6
<PAGE> 83
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of in its individual capacity, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal of or interest on this Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-2-7
<PAGE> 84
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:_______
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints , attorney, to transfer said Note on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:___________________
Signature Guaranteed:
_________________________
*/ NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
A-2-8
<PAGE> 85
EXHIBIT A-3
(FORM OF CLASS A-3 NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
$__________
No._______ CUSIP NO.________
ONYX ACCEPTANCE OWNER TRUST 199_-_
CLASS A-3 ____% AUTO LOAN BACKED NOTES
Onyx Acceptance Owner Trust 199_-_, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of _______________ DOLLARS (__________)
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL
AMOUNT OF NOTE] and the denominator of which is $__________ by (ii) the
aggregate amount, if any, payable from the Distribution Account in respect of
principal on the Class A-3 Notes pursuant to Section 3.1 of the Indenture dated
as of , 199 , between the Issuer and _______________, a __________ banking
corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of the Distribution Date (the "Class A 3 Final Scheduled
Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. No payments of principal of the Class A-3 Notes shall be made
until the Class A-1 Notes and the Class A-2 Notes have been paid in full.
Capitalized terms used but not defined herein are defined in Article I of the
Indenture, which also contains rules as to construction that shall be applicable
herein.
A-3-1
<PAGE> 86
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.1 of the Indenture. Interest on this Note will accrue for
each Distribution Date from the second day of the month preceding the month of
such Distribution Date (in the case of the first Distribution Date, from the
Closing Date) to and including the first day of the month of such Distribution
Date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
ONYX ACCEPTANCE OWNER TRUST 199_-_
By:______________________________________
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
By:______________________________________
Authorized Signatory
A-3-2
<PAGE> 87
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:______________
_________________________________________
not in its individual capacity
but solely as Indenture Trustee,
By:_____________________________________
Authorized Signatory
A-3-3
<PAGE> 88
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 ___% Auto Loan Backed Notes (herein called the
"Class A-3 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-3 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
second day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing __________, 199__.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-3 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of the Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable in
the manner provided in Section 5.2 of the Indenture. All principal payments on
the Class A-3 Notes shall be made pro rata to the Class A-3 Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the
A-3-4
<PAGE> 89
Indenture Trustee's principal Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located in The City of
New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Class A-3 Notes may be redeemed (a) in
whole, but not in part, at the option of the Servicer, on any Distribution Date
on and after the date on which the Pool Balance is less than or equal to 10% of
the Original Pool Balance and (b) in part on the Distribution Date on which the
Funding Period ends (or on the Distribution Date immediately following the last
day of the Funding Period, if the Funding Period does not end on a Distribution
Date), in the manner and to the extent described in the Indenture and the Sale
and Servicing Agreement, in the event that an amount in excess of $100,000
remains on deposit in the Pre-Funding Account after giving effect to the
purchase of all Contracts, including any such purchase on such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
A-3-5
<PAGE> 90
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
A-3-6
<PAGE> 91
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of in its individual capacity, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal of or interest on this Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-3-7
<PAGE> 92
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:______
_____________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _______________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated:_________________*/
Signature Guaranteed:
_______________________
*/ NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
A-3-8
<PAGE> 1
EXHIBIT 4.4
ONYX ACCEPTANCE FINANCIAL CORPORATION
Seller
ONYX ACCEPTANCE CORPORATION
Servicer
and
------------------------
Trustee
FORM OF POOLING AND SERVICING AGREEMENT
Dated as of ________, 199_
ONYX ACCEPTANCE GRANTOR TRUST, 199_-_
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
Definitions
SECTION 1.1 Definitions............................................................1
SECTION 1.2 Usage of Terms........................................................14
SECTION 1.3 Section References....................................................15
SECTION 1.4 Calculations..........................................................15
SECTION 1.5 Accounting Terms......................................................15
ARTICLE II
Conveyance of the Contracts; Representation and Warranties of the Seller
SECTION 2.1 Sale and Assignment of Contracts......................................15
SECTION 2.2 Representations and Warranties........................................17
SECTION 2.3 Repurchase of Certain Contracts.......................................22
SECTION 2.4 Duties and Appointment of Custodian...................................23
SECTION 2.5 Duties of Servicer Relating to the Contracts..........................24
SECTION 2.6 Instructions; Authority to Act........................................25
SECTION 2.7 Indemnification.......................................................26
SECTION 2.8 Effective Period and Termination......................................26
SECTION 2.9 Nonpetition Covenant..................................................27
SECTION 2.10 Collecting Title Documents Not Delivered at the Closing Date..........27
ARTICLE III
Administration and Servicing of Contracts
SECTION 3.1 Duties of Servicer....................................................27
SECTION 3.2 Collection of Contract Payments.......................................29
SECTION 3.3 Realization Upon Contracts............................................30
SECTION 3.4 Insurance.............................................................30
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles................30
SECTION 3.6 Covenants, Representations and Warranties of Servicer.................31
SECTION 3.7 Purchase of Contracts Upon Breach of Covenant.........................32
SECTION 3.8 Servicing Compensation................................................33
SECTION 3.9 Reporting by the Servicer.............................................33
SECTION 3.10 Annual Statement as to Compliance.....................................35
SECTION 3.11 Annual Independent Certified Public Accountant's Report...............35
SECTION 3.12 Access to Certain Documentation and Information
Regarding Contracts...................................................36
SECTION 3.13 Fidelity Bond.........................................................36
SECTION 3.14 Indemnification; Third Party Claims...................................36
SECTION 3.15 Reports to Certificateholders and the Rating Agencies.................36
</TABLE>
- i -
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
(Continued) PAGE
<S> <C>
ARTICLE IV
Accounts; Distributions; Statements to Certificateholders
SECTION 4.1 Accounts..............................................................37
SECTION 4.2 Collections; Transfer to Payahead Account; Realization
Upon Financial Guarantee Insurance Policy; Net Deposit................38
SECTION 4.3 Distributions.........................................................39
SECTION 4.4 Remittance Of Repurchase Amount.......................................40
SECTION 4.5 Statements to Certificateholders......................................40
ARTICLE V
The Certificates
SECTION 5.1 The Certificates......................................................41
SECTION 5.2 Execution, Authentication and Delivery of Certificates................41
SECTION 5.3 Registration of Transfer and Exchange of Certificates.................41
SECTION 5.4 Mutilated, Destroyed, Lost or Stolen Certificates.....................42
SECTION 5.5 Persons Deemed Owners.................................................42
SECTION 5.6 Access to List of Certificateholders' Names and Addresses.............42
SECTION 5.7 Maintenance of Office or Agency.......................................43
SECTION 5.8 Book-Entry Certificates...............................................43
SECTION 5.9 Notices to Clearing Agency............................................44
SECTION 5.10 Definitive Certificates...............................................44
SECTION 5.11 Appointment of Paying Agent...........................................45
SECTION 5.12 Authenticating Agent..................................................45
SECTION 5.13 Actions of Certificateholders.........................................46
ARTICLE VI
The Seller
SECTION 6.1 Liability of Seller; Indemnities......................................47
SECTION 6.2 Merger or Consolidation of, or Assumption of the
Obligations of, Seller................................................48
SECTION 6.3 Limitation on Liability of Seller and Others..........................48
SECTION 6.4 Seller Not to Resign..................................................48
SECTION 6.5 Seller May Own Certificates...........................................48
ARTICLE VII
The Servicer
SECTION 7.1 Liability of Servicer; Indemnities....................................48
SECTION 7.2 Corporate Existence; Status as Servicer; Merger.......................49
</TABLE>
- ii -
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
(Continued) PAGE
<S> <C>
SECTION 7.3 Performance of Obligations............................................50
SECTION 7.4 The Servicer Not to Resign; Assignment................................50
SECTION 7.5 Limitation on Liability of Servicer and Others........................51
ARTICLE VIII
Default
SECTION 8.1 Events of Default.....................................................51
SECTION 8.2 Trustee to Act; Appointment of Successor..............................53
SECTION 8.3 Notification to Certificateholders....................................53
SECTION 8.4 Waiver of Past Defaults...............................................54
SECTION 8.5 Insurer Direction of Insolvency Proceedings...........................54
ARTICLE IX
The Trustee
SECTION 9.1 No Power to Engage in Business or to Vary Investments.................54
SECTION 9.2 Duties of Trustee.....................................................55
SECTION 9.3 Trustee's Assignment of Purchased Contracts...........................57
SECTION 9.4 Certain Matters Affecting the Trustee.................................57
SECTION 9.5 Trustee Not Liable for Certificates or Contracts......................59
SECTION 9.6 Trustee May Own Certificates..........................................59
SECTION 9.7 Trustee's Fees and Expenses...........................................59
SECTION 9.8 Indemnity of Trustee..................................................60
SECTION 9.9 Eligibility Requirements for Trustee..................................60
SECTION 9.10 Resignation or Removal of Trustee.....................................61
SECTION 9.11 Successor Trustee.....................................................61
SECTION 9.12 Merger or Consolidation of Trustee....................................62
SECTION 9.13 Appointment of Co-Trustee or Separate Trustee.........................62
SECTION 9.14 Representations and Warranties of Trustee.............................63
SECTION 9.15 Tax Returns...........................................................64
SECTION 9.16 Trustee May Enforce Claims Without Possession of Certificates.........64
SECTION 9.17 Suits for Enforcement.................................................64
SECTION 9.18 Maintenance of Office or Agency.......................................65
ARTICLE X
Termination
SECTION 10.1 Termination of the Trust..............................................65
SECTION 10.2 Optional Purchase of All Contracts....................................66
</TABLE>
- iii -
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
(Continued) PAGE
<S> <C>
ARTICLE XI
Miscellaneous Provisions
SECTION 11.1 Amendment..........................................................66
SECTION 11.2 Protection of Title to Trust.......................................67
SECTION 11.3 Limitation on Rights of Certificateholders.........................69
SECTION 11.4 Governing Law......................................................70
SECTION 11.5 Notices............................................................70
SECTION 11.6 Severability of Provisions.........................................70
SECTION 11.7 Assignment.........................................................70
SECTION 11.8 Certificates Nonassessable and Fully Paid..........................71
SECTION 11.9 Third Party Beneficiaries..........................................71
SECTION 11.10 Insurer Default or Insolvency......................................71
SECTION 11.11 Tax Matters........................................................71
</TABLE>
- iv -
<PAGE> 6
EXHIBITS
Exhibit A - Form of Appointment of Custodian
Exhibit B - Form of Certificate
Exhibit C - Form of Financial Guarantee Insurance Policy
Schedule I - Schedule of Contracts
Schedule II- Schedule of Accounts
- v -
<PAGE> 7
This Pooling and Servicing Agreement, dated as of _______, 199_, is made
with respect to the formation of the Onyx Acceptance Grantor Trust, 199_-_,
among Onyx Acceptance Financial Corporation, a Delaware corporation, as
originator of the Trust and Seller, Onyx Acceptance Corporation, a Delaware
corporation, as Servicer, and _______________, a _________ banking corporation,
as Trustee.
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, and of other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
"Accounts" have the meaning specified in Section 4.1. The location and
account numbers of the Accounts as of the Closing Date are set forth on
Schedule II.
"Affiliate" of any specified Person means any other Person controlling
or controlled by or under common control with such specified Person. For the
purpose of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Scheduled Balance" means, with respect to any date, the
aggregate of the Scheduled Balances of the Contracts as of such date.
"Aggregate Scheduled Balance Decline" means, with respect to any
Distribution Date, the amount by which the Aggregate Scheduled Balance of the
Contracts as of the beginning of such related Collection Period exceeds the
Aggregate Scheduled Balance of such Contracts as of the end of such related
Collection Period.
"Agreement" means this Pooling and Servicing Agreement and all
supplements, modifications and amendments hereto.
"Amount Available" means, with respect to any Distribution Date, the sum
of (i) the Collection Account Amount Available for such Distribution Date, and
(ii) the Policy Claim Amount actually received by the Trustee for such
Distribution Date.
<PAGE> 8
"Appointment of Custodian" means the letter agreement between the
Trustee and the Servicer substantially in the form attached hereto as Exhibit A.
"APR" means the annual percentage rate used to determine the total
interest expected to be charged over the term of a Contract as of its inception,
as shown on such Contract.
"Authenticating Agent" shall have the meaning specified in Section 5.12.
"Bank" means the institution designated as such pursuant to the
Insurance Agreement, or a successor Person pursuant to the Insurance Agreement,
and thereafter "Bank" shall mean such successor Person.
"Blanket Insurance Policy" means the Lender's Blanket Consumer Loan
Insurance Policy covering losses with respect to the Contracts, which policy has
been issued by United Financial Casualty Company and the Servicer's rights
therein with respect to the Contracts have been validly assigned to the Trustee
acting on behalf of the Trust.
"Book-Entry Certificates" means beneficial interests in the Certificates
referred to in Section 5.8, the ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in Section 5.8.
"Business Day" means any day other than a Saturday, a Sunday or other
day on which commercial banking institutions or savings associations located in
Los Angeles, California or New York, New York are authorized or obligated by
law, regulation, executive order or governmental decree to be closed.
"Certificate" means a certificate executed and authenticated by the
Trustee substantially in the form of Exhibit B hereto.
"Certificate Distribution Amount" means, with respect to any
Distribution Date, the sum of the Interest Distribution for such Distribution
Date and the Principal Distribution for such Distribution Date, plus, but only
in the case of any Distribution Date in respect of which the Servicer purchases
the corpus of the Trust pursuant to Section 10.2, an amount equal to (a) the
Pool Balance with respect to such Distribution Date minus (b) the Principal
Distribution for such Distribution Date.
"Certificate Owner" means, with respect to a Book-Entry Certificate, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a direct or indirect Clearing
Agency Participant.
"Certificate Register" and "Certificate Registrar" mean, respectively,
the register maintained and the registrar appointed pursuant to Section 5.3.
"Certificateholder" or "Holder" means the Person in whose name the
respective Certificate shall be registered in the Certificate Register, except
that, solely for the purposes of giving any notices, consents or waivers
pursuant to this Agreement, the interest evidenced by any Certificate
- 2 -
<PAGE> 9
registered in the name of the Seller or the Servicer, or any Person controlling,
controlled by, or under common control with the Seller or the Servicer, shall
not be taken into account in determining whether the requisite percentage
necessary to effect any such consent shall have been obtained.
"Clearing Account" means Account No. ____________ in the name of the
Seller maintained at ______________.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The initial Clearing Agency shall be The Depository Trust Company.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers of securities deposited with the Clearing
Agency.
"Closing Date" means _________, 199_.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means the account established and maintained as the
"Collection Account" pursuant to Section 4.1.
"Collection Account Amount Available" means, with respect to any
Distribution Date and the related Collection Period, the sum of (i) all payments
of Monthly P&I, all partial prepayments, all Full Prepayments, Net Liquidation
Proceeds and Net Insurance Proceeds in each case, collected with respect to the
Contracts during such Collection Period, less partial prepayments of Rule of
78's Contracts collected with respect to the Contracts during such Collection
Period which are deposited in the Payahead Account pursuant to Section 4.2(a),
(ii) amounts withdrawn from the Payahead Account pursuant to Section 4.1(b) and
deposited in the Collection Account with respect to such Distribution Date, and
(iii) the aggregate Repurchase Amount for Repurchased Contracts deposited in or
credited to the Collection Account pursuant to Section 4.4 on the Business Day
preceding the Servicer Report Date next preceding such Distribution Date.
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs;
provided that for Liquidated Contracts the Collection Period will be the period
from but excluding the sixth Business Day preceding the immediately preceding
Distribution Date to and including the sixth Business Day preceding such
Distribution Date; provided, further, however, that with respect to the first
Distribution Date the "Collection Period" for Liquidated Contracts shall be the
period from and including the Cut-Off Date to and including the sixth Business
Day preceding such first Distribution Date.
"Contract" means each retail installment sales contract and security
agreement or installment loan agreement and security agreement and all proceeds
thereof and payments thereunder, which contract or agreement has been executed
by an Obligor and pursuant to which such Obligor purchased or financed the
Financed Vehicle described therein, agreed to pay the deferred purchase price
(i.e., the purchase price net of any down payment) or amount borrowed, together
with interest,
- 3 -
<PAGE> 10
as therein provided in connection with such purchase or loan, granted a security
interest in such Financed Vehicle, and undertook to perform certain other
obligations as specified in such contract or agreement. Each Contract shall have
been (i) either (A) originated or purchased by a subsidiary of Onyx and
subsequently conveyed to Onyx or (B) originated by a Dealer and assigned to Onyx
in accordance with the assignment provisions set forth therein and (ii) in
either case subsequently conveyed by Onyx to Finco pursuant to the Purchase
Agreement and then by Finco to the Trust pursuant to this Agreement.
"Contract Documents" means, with respect to each Contract, (a) the
Contract and the original credit application fully executed by the Obligor
thereunder; (b) either (i) the original Title Document for the related Financed
Vehicle or a duplicate copy thereof issued or certified by the Registrar of
Titles which issued the original thereof (or, with respect to certain of the
Financed Vehicles registered in the State of California, evidence of the
electronic Title Document), together with evidence of perfection of the security
interest in the related Financed Vehicle granted by such Contract, as determined
by the Servicer to be permitted or required to perfect such security interest
under the laws of the applicable jurisdiction, or (ii) written evidence that the
Title Document for such Financed Vehicle showing Onyx or a subsidiary of Onyx as
first lienholder has been applied for; and (c) any agreement(s) modifying the
Contract (including, without limitation, any extension agreement(s)).
"Contract Files" means the Contract Documents and all other papers and
computerized records customarily kept by the Servicer in connection with
servicing contracts and loans comparable to the Contracts.
"Contract Number" means, with respect to any Contract included in the
Trust, the number assigned to such Contract by the Servicer, which number is set
forth in the Schedule of Contracts.
"Contract Rate" means (i) with respect to a Rule of 78's Contract, the
Recomputed Yield for such Contract used in accordance with the definition of the
term "Scheduled Balance" to derive the Scheduled Balance from time to time of
such Rule of 78's Contract, and (ii) with respect to a Simple Interest Contract,
the APR.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the time of the execution of this Agreement is
located at __________________________________________, Attn.:
_____________________________, or at such other address as the Trustee may
designate from time to time by notice to the Certificateholders, the Seller, the
Servicer and the Insurer.
"Custodian" means initially, the Trustee, and thereafter any custodian
that may be appointed by the Trustee pursuant to Section 2.4(b).
"Cut-Off Date" means __________, 199__.
"Dealer" means the seller of a Financed Vehicle, which seller originated
and assigned the related Contract.
- 4 -
<PAGE> 11
"Default" means any occurrence which with the giving of notice or the
lapse of time or both would become an Event of Default.
"Defaulted Contract" means, with respect to any Collection Period, a
Contract (i) which is, at the end of such Collection Period, past due in an
aggregate amount equal to two or more monthly installments of Monthly P&I or
(ii) with respect to which the related Financed Vehicle has been repossessed or
repossession efforts with respect to the related Financed Vehicle have been
commenced.
"Deficiency Notice" means, with respect to any Distribution Date, the
notice for payment under the Financial Guarantee Insurance Policy delivered by
the Trustee to the Fiscal Agent and the Bank pursuant to Section 4.2(c).
"Definitive Certificates" has the meaning set forth in Section 5.8.
"Depository Agreement" shall mean the agreement among the Seller, the
Trustee and the initial Clearing Agency, in the form currently used by the
Clearing Agency.
"Distribution Account" means the segregated trust account established by
the Trustee denominated "Distribution Account--GT 199_-_, ________________,
Trustee."
"Distribution Date" means the 15th day of each month or if such date
shall not be a Business Day, the following Business Day, commencing in ______
199_.
"Distribution Date Statement" has the meaning set forth in Section 3.9.
"Due Date" means, as to any Contract, the date in each month upon which
an installment of Monthly P&I is due.
"Eligible Account" means (i) a trust account that is either (a)
maintained by the Trustee, (b) maintained with a depository institution or trust
company the commercial paper or other short-term debt obligations of which have
credit ratings from Standard & Poor's at least equal to "A-1" and from Moody's
equal to "P-1," which account is fully insured up to applicable limits by the
Federal Deposit Insurance Corporation or (c) maintained with a depository
institution acceptable to the Insurer, as evidenced by a letter from the Insurer
to that effect or (ii) a general ledger account or deposit account at a
depository institution acceptable to the Insurer, as evidenced by a letter from
the Insurer to that effect.
"Eligible Investments" means any one or more of the following
obligations or securities, all of which shall be denominated in United States
dollars:
(a) direct obligations of, and obligations fully guaranteed as to timely
payment of principal and interest by, the United States of America or any agency
or instrumentality of the United States of America the obligations of which are
backed by the full faith and credit of the United States of America and, to the
extent, at the time of investment, acceptable to the Insurer and each Rating
Agency for securities having a rating equivalent to the rating of the
Certificates at the Closing Date,
- 5 -
<PAGE> 12
the direct obligations of, or obligations fully guaranteed by, the Federal Home
Loan Mortgage Corporation and the Federal National Mortgage Association;
(b) demand and time deposits in, certificates of deposit of, banker's
acceptances issued by, or federal funds sold by any depository institution or
trust company (including the Trustee) incorporated under the laws of the United
States of America or any State and subject to supervision and examination by
Federal and/or State banking authorities, so long as at the time of such
investment or contractual commitment providing for such investment either (i)
the long-term, unsecured debt obligations of such depository institution or
trust company have credit ratings from Standard & Poor's at least equal to "AA-"
and from Moody's at least equal to "Aa2" or (ii) such depository institution is
acceptable to the Insurer as evidenced by a letter from the Insurer to the
Trustee;
(c) repurchase obligations with respect to (i) any security described in
clause (a) above or (ii) any other security issued or guaranteed as to timely
payment of principal and interest by an agency or instrumentality of the United
States of America, in either case entered into with any depository institution
or trust company (including the Trustee), acting as principal, described in
clause (b) above;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or any
state thereof which at the time of such investment or contractual commitment
providing for such investment have long-term, unsecured debt obligations rated
by Standard & Poor's "AA-" or better and by Moody's "Aa2" or better; provided,
however, that securities issued by any corporation will not be Eligible
Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and held
as part of the Trust to exceed __% of the aggregate Outstanding Principal
Balances of the Contracts and all amounts of Eligible Investments held as part
of the Trust;
(e) commercial paper having the highest rating by Standard & Poor's and
Moody's at the time of such investment;
(f) investments in money market funds or money market mutual funds
having a rating from Standard & Poor's and Moody's in the highest investment
category granted thereby, including funds for which the Trustee or any of its
Affiliates is investment manager or advisor; and
(g) such other obligations or securities acceptable to the Insurer, as
evidenced by a letter from the Insurer to the Trustee (which acceptability may
be revoked at any time by the Insurer).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means an event specified in Section 8.1.
"Final Distribution Date" means ________, 200_.
"Financial Guarantee Insurance Policy" means the irrevocable financial
guarantee insurance policy issued by the Insurer to the Trustee, the form of
which is attached hereto as Exhibit C.
- 6 -
<PAGE> 13
"Financed Vehicle" means, as to any Contract, the automobile, light-duty
truck or van, together with all accessions thereto, securing an Obligor's
indebtedness under such Contract.
"Fiscal Agent" means the party designated as such under the Financial
Guarantee Insurance Policy.
"Full Prepayment" means any of the following: (a) with respect to any
Contract other than a Contract referred to in clause (ii), (iii) or (iv) of the
definition of the term "Liquidated Contract", payment by or on behalf of the
Obligor of the total amount required by the terms of such Contract to be paid
thereunder, which amount shall be at least equal to the sum of (i) 100% of the
Scheduled Balance of such Contract, (ii) interest accrued thereon to the date of
such payment at the APR; and (iii) any overdue amounts; or (b) with respect to
any Contract, payment by the Seller to the Trustee of the Repurchase Amount of
such Contract in connection with the repurchase of such Contract pursuant to
Section 2.3, or payment by the Servicer of the Repurchase Amount of such
Contract in connection with the purchase of such Contract pursuant to Section
3.7 or the purchase of all Contracts pursuant to Section 10.2.
"Insurance Agreement" means the Insurance and Reimbursement Agreement to
be dated as of the Closing Date, among the Seller, the Servicer, the Trustee and
the Insurer as amended, modified or restated from time to time.
"Insurance Proceeds" means proceeds paid pursuant to the Blanket
Insurance Policy and amounts (exclusive of rebated premiums) paid by any insurer
under any other insurance policy related to a Financed Vehicle or a Contract.
"Insurer" means _______________________ or its successor in interest.
"Insurer Insolvency" means (i) the entry of a decree or order for relief
by a court or regulatory authority having jurisdiction in respect of the Insurer
in an involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bank bankruptcy,
insolvency, rehabilitation or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Insurer or with respect to any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Insurer and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or (ii) the commencement by the Insurer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency, rehabilitation or similar law,
or the consent by the Insurer to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Insurer or of any substantial part of its property or
the making by the Insurer of an assignment for the benefit of creditors or the
failure by the Insurer generally to pay its debts as such debts become due or
the taking of corporate action by the Insurer in furtherance of any of the
foregoing.
"Interest Distribution" means, with respect to any Distribution Date
(referred to in this definition as the "current Distribution Date"), interest
equal to the product of one-twelfth of the Pass- Through Rate and the Pool
Balance as of the end of the Collection Period immediately preceding the related
Collection Period (or, if the current Distribution Date is the first
Distribution Date, as of the
- 7 -
<PAGE> 14
Cut-Off Date) plus the amount of interest previously due but not paid to
Certificateholders, if any; provided, however, that the Interest Distribution
with respect to the first Distribution Date shall include an additional $______,
which is equal to $____ (representing two days' interest at the Pass- Through
Rate) per $1,000 of initial principal balance of the Certificates.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics' liens, and any liens
that attach to the applicable Contract by operation of law.
"Liquidated Contract" means a Contract which (i) was or is the subject
of a Full Prepayment; or (ii) was or is a Defaulted Contract with respect to
which Liquidation Proceeds constituting, in the Servicer's reasonable judgment,
the final amounts recoverable in respect of such Defaulted Contract have been
received and deposited in the Collection Account; or (iii) was or is paid in
full on or after its Maturity Date; or (iv) has been a Defaulted Contract for
four or more Collection Periods and with respect to which Liquidation Proceeds
have not been deposited in the Collection Account; provided, however, that in
any event a Contract that is delinquent in the amount of five monthly
installments of Monthly P&I at the end of a Collection Period is a Liquidated
Contract. The Scheduled Balance of a Contract that becomes a Liquidated Contract
shall be reduced to zero as provided in the definition of "Scheduled Balance."
"Liquidation Expenses" means reasonable out-of-pocket expenses (not to
exceed Liquidation Proceeds), other than any overhead expenses, incurred by the
Servicer in connection with the realization of the full amounts due under any
Defaulted Contract (including the attempted liquidation of a Contract which is
brought current and is no longer in default during such attempted liquidation)
and the sale of any property acquired in respect thereof which are not
recoverable as Insurance Proceeds.
"Liquidation Proceeds" means amounts received by the Servicer (before
reimbursement for Liquidation Expenses) in connection with the realization of
the full amounts due and to become due under any Defaulted Contract and the sale
of any property acquired in respect thereof.
"Maturity Date" means with respect to any Contract, the date on which
the last scheduled payment of such Contract shall be due and payable, as such
date may be extended pursuant to Section 3.2.
"Monthly P&I" means, with respect to any Contract, the amount of each
monthly installment payment of principal and interest payable to the Obligee of
such Contract in accordance with the terms thereof, exclusive of any charges
allocable to the financing of any insurance premium and charges which represent
late payment charges or extension fees.
"Moody's" means Moody's Investors Service, Inc. and its successors in
interest.
"Net Insurance Proceeds" means, with respect to any Contract, Insurance
Proceeds, net of any such amount applied to the repair of the related Financed
Vehicle, released to an Obligor in accordance with the normal servicing
procedures of the Servicer or representing expenses incurred by the Servicer and
recoverable under the applicable policy.
- 8 -
<PAGE> 15
"Net Liquidation Proceeds" means the amount derived by subtracting from
the Liquidation Proceeds of such Contract the related Liquidation Expenses.
"Obligee" means, with respect to any Contract, the Person to whom an
Obligor is indebted under such Contract.
"Obligor" means, with respect to any Contract, the purchaser or the
co-purchasers of the Financed Vehicle or any other Person who owes payments
under such Contract.
"Officers' Certificate" means a Certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
any Person delivering such Certificate and delivered to the Person to whom such
Certificate is required to be delivered. In the case of an Officers' Certificate
of the Servicer, at least one of the signing officers must be a Servicing
Officer. Unless otherwise specified, any reference herein to an Officers'
Certificate shall be to an Officers' Certificate of the Servicer.
"Onyx" means Onyx Acceptance Corporation and its successors in interest.
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel to the Seller or the Servicer) acceptable to the Trustee and the
Insurer.
"Original Pool Balance" means the Aggregate Scheduled Balance as of the
Cut-Off Date, which is $____________.
"Outstanding" means, with respect to a Contract and as of the time of
reference thereto, a Contract that has not reached its Maturity Date, has not
been fully prepaid, has not become a Liquidated Contract and has not been
repurchased or purchased pursuant to Sections 2.3, 3.7 or 10.2.
"Outstanding Principal Balance" means, as of the Cut-Off Date, (i) with
respect to any Rule of 78's Contract, the amount set forth as the Outstanding
Principal Balance of such Contract on the Schedule of Contracts, such amount
being the total of all unpaid Monthly P&I due on or after the Cut-Off Date,
minus any unearned (or earned but unpaid) interest as of the Cut-Off Date
computed in accordance with the Rule of 78's, and (ii) with respect to any
Simple Interest Contract, the amount set forth as the Outstanding Principal
Balance of such Contract on the Schedule of Contracts, such amount being the
total of all principal payments due on or after the Cut-Off Date.
"Pass-Through Rate" means ____% per annum (computed on the basis of a
360-day year of twelve 30-day months payable monthly).
"Payahead Account" means the account established and maintained as the
"Payahead Account" pursuant to Section 4.1.
"Paying Agent" shall mean the Person acting as such as provided in
Section 5.11.
- 9 -
<PAGE> 16
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Policy Claim Amount" means, with respect to each Distribution Date, the
amount, if any, by which the Certificate Distribution Amount plus the Servicing
Fee for such Distribution Date exceeds the Collection Account Amount Available
for such Distribution Date.
"Pool Balance" means, with respect to a Distribution Date, the Aggregate
Scheduled Balance of the Contracts as of the end of the related Collection
Period, exclusive of all Contracts that are not Outstanding at the end of such
Collection Period.
"Pool Factor" means, as of a Distribution Date, a six-digit decimal
figure equal to the Pool Balance with respect to such Distribution Date divided
by the Original Pool Balance.
"Preference Claim" has the meaning set forth in Section 8.5.
"Premium" shall have the meaning assigned thereto in the Insurance
Agreement.
"Principal Distribution" means, with respect to any Distribution Date,
the Aggregate Scheduled Balance Decline for such Distribution Date; provided
that the Principal Distribution on the Final Distribution Date will include the
Aggregate Scheduled Balance of all Contracts that are Outstanding at the end of
the Collection Period immediately prior to the Final Distribution Date.
"Purchase Agreement" means the Sale and Servicing Agreement dated as of
September 8, 1994 between Onyx Acceptance Corporation as seller and Onyx
Acceptance Financial Corporation as purchaser, and as such agreement may have
been or may be modified, supplemented or amended from time to time.
"Rating Agencies" means Moody's and Standard & Poor's.
"Recomputed Actuarial Method" means a method of accounting pursuant to
which each payment of Monthly P&I due on a Rule of 78's Contract will be deemed
to consist of interest equal to the product of 1/12 of the Recomputed Yield for
such Contract and the Scheduled Balance of the Contract as of the preceding Due
Date for such Contract and of principal to the extent of the remainder of such
scheduled installment of Monthly P&I, which will cause the Outstanding Principal
Balance as of the Cut-Off Date to be amortized in full at the Recomputed Yield.
"Recomputed Yield" for any Rule of 78's Contract means the per annum
rate determined as of the Cut-Off Date, such that the net present value of the
remaining scheduled payments due on such Contract, discounted at such rate from
the Due Date for each such scheduled payment to the Due Date for such Contract
immediately preceding the Cut-Off Date, will equal the Outstanding Principal
Balance.
- 10 -
<PAGE> 17
"Record Date" means, with respect to any Distribution Date, the Business
Day prior to such Distribution Date, unless Definitive Certificates have been
issued, in which case Record Date shall mean the last day of the immediately
preceding calendar month.
"Registrar of Titles" means the agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and issuing
documents evidencing such titles in the jurisdiction in which a particular
Financed Vehicle is registered.
"Repurchase Amount" means the amount, as of the date of purchase or
repurchase of any Contract, equal to the Scheduled Balance of such Contract as
of the Due Date in the Collection Period in which such purchase or repurchase
occurs plus interest on such Contract through such Due Date, to the extent not
previously collected.
"Repurchased Contract" means a Contract (i) purchased as of the Business
Day prior to the respective Servicer Report Date by the Servicer pursuant to
Section 3.7 or (ii) repurchased by the Seller pursuant to Section 2.3. The
Scheduled Balance of a Contract that becomes a Repurchased Contract shall be
reduced to zero as provided in the definition of "Scheduled Balance."
"Responsible Officer" means any officer of the Trustee within the
Corporate Trust Office including any vice president, assistant vice president,
assistant treasurer, assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers with direct responsibility for the administration of this
Agreement, respectively, or to whom any corporate trust matter is referred
because of his knowledge of and familiarity with the particular subject.
"Rule of 78's Contract" means a Contract as to which the portion of
payments allocable to earned interest and principal thereunder is determined
according to the "Rule of 78's." Under the "Rule of 78's," the amount of each
payment allocable to interest on a Contract is determined by multiplying the
total amount of add-on interest payable over the term of the Contract by a
fraction, the denominator of which is equal to the sum of a series of numbers
representing the total number of monthly payments due under the Contract and the
numerator of which is the number of payments remaining before giving effect to
the payment to which the fraction is being applied.
"Schedule of Contracts" means the list of Contracts, attached hereto as
Schedule I, which are being sold to the Trust as part of the Trust Estate,
together with supplemental data regarding the Contracts calculated by
_______________ and verified by the Servicer. The Schedule of Contracts attached
hereto as Schedule I sets forth the Original Pool Balance, as well as the
following information with respect to each Contract in columns:
Contract Number ("ACCT NBR")
Date of Origination ("ORG DT")
Maturity Date ("MAT DT")
Monthly P&I ("P&I")
Original Principal Balance ("ORIG AMT")
Outstanding Principal Balance ("PRIN BAL")
Annual Percentage Rate ("APR")
- 11 -
<PAGE> 18
In addition, the information contained in Schedule I shall also be contained on
a computer disk or tape (the "Disk") that shall be delivered by the Servicer to
the Trustee not later than the 5th Business Day following the Closing Date. The
Recomputed Yield and the Scheduled Balance of each Rule of 78's Contract for
each Due Date after the Cut-Off Date, computed in accordance with the definition
of Scheduled Balance set forth herein, as calculated by _______________ and
verified by the Servicer, shall supplement Schedule I and shall be a part of the
Schedule of Contracts and made available by the Servicer to the Trustee upon
reasonable request.
"Scheduled Balance" means, with respect to any Simple Interest Contract
as of the Cut-Off Date, the amount set forth as the "Original Principal Balance"
of such Contract on the Schedule of Contracts. "Scheduled Balance" means, with
respect to any Simple Interest Contract for the Due Date or any other date in
each month, the original principal balance of such Contract reduced by the
portion of Monthly P&I paid on or prior to the date of calculation that is
allocated to principal under the Simple Interest Method. "Scheduled Balance"
means, with respect to any Rule of 78's Contract for the Due Date in each month
and as of the Cut-Off Date, the amount set forth as the "Scheduled Balance" of
such Contract for the Due Date or the Cut-Off Date, as applicable, on the
Schedule of Contracts. For a Rule of 78's Contract, the "Scheduled Balance" of
such Contract as of the Cut-Off Date or for any date in each month shall be the
present value as of the Cut-Off Date or other date of calculation for the
applicable month (determined as provided below), of all payments of Monthly P&I
on the Contract due after such month (or due during or after the first
Collection Period in the case of a Scheduled Balance as of the Cut-Off Date).
Such present value as of the Cut-Off Date shall be determined by discounting, on
a monthly basis, each such scheduled payment of Monthly P&I from the Due Date
for such payment back to the Cut-Off Date, using the Recomputed Yield for such
Contract as the discount rate. Such present value as of any date in each month
shall be determined by discounting, on a monthly basis, each such scheduled
payment of Monthly P&I from the Due Date for such payment back to the Due Date
for such Contract in the Collection Period in which the date of calculation
falls, using the Recomputed Yield for such Contract as the discount rate. The
Scheduled Balance of a Rule of 78's Contract that becomes a Liquidated Contract
or a Repurchased Contract shall be reduced to zero as of the close of business
on the Due Date for such Contract in the Collection Period in which such
Contract became a Liquidated Contract or a Repurchased Contract. The Scheduled
Balance of a Simple Interest Contract that becomes a Liquidated Contract or a
Repurchased Contract shall be reduced to zero as of the close of business on the
date the Contract becomes a Liquidated Contract or is repurchased, as the case
may be.
"Seller" means Onyx Acceptance Financial Corporation in its capacity as
the seller of the Contracts under this Agreement, and each successor to Onyx
Acceptance Financial Corporation (in the same capacity) pursuant to Section 6.2.
"Servicer" means Onyx Acceptance Corporation in its capacity as the
servicer of the Contracts under Section 3.1, and, in each case upon such
succession in accordance herewith, each successor to Onyx Acceptance Corporation
in the same capacity pursuant to Section 7.2 and each successor servicer
pursuant to Section 8.2.
"Servicer Report Date" means the fifth Business Day prior to the related
Distribution Date.
- 12 -
<PAGE> 19
"Servicing Fee" means, as to any Distribution Date, the fee payable to
the Servicer for services rendered during the Collection Period ending
immediately prior to such Distribution Date, which shall equal with respect to
each Outstanding Contract, the product of (A) one-twelfth of the Servicing Fee
Percent and (B) the Scheduled Balance of such Contract as of the opening of
business on the first day of such Collection Period; provided, however, that
with respect to the first Distribution Date the aggregate of the Servicing Fees
for all of the Contracts shall be the product of (A) one-twelfth of the
Servicing Fee Percent and (B) the Original Pool Balance. As additional
compensation, the Servicer will be entitled to any late fees and other
administrative fees and expenses or similar charges collected with respect to
the Contracts. The Servicer or its designee will also receive as servicing
compensation all investment earnings on funds credited to the Collection Account
and the amount, if any, by which the outstanding principal balance of a Rule of
78's Contract (calculated in accordance with the Rule of 78's method) that is
subject to a Full Prepayment exceeds the Scheduled Balance of such Contract;
provided, however, that the Servicer agrees that each amount payable to it in
respect of a Full Prepayment on a Rule on 78's Contract that exceeds such
Contract's Scheduled Balance shall be deposited in the Spread Account and
applied in accordance with the Insurance Agreement.
"Servicing Fee Percent" means _____% per annum.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may be amended or supplemented from time to time.
"Servicing Standards" means at any time the quality of the Servicer's
performance with respect to (i) compliance with the terms of this Agreement and
(ii) adequacy, measured in accordance with industry standards and current and
historical standards of the Servicer, in respect of the servicing of all
Contracts serviced by the Servicer, regardless of whether any such Contract is
owned by the Servicer or otherwise.
"Simple Interest Contract" means a Contract as to which the portion of
payments allocable to earned interest and principal thereunder is determined
according to the Simple Interest Method. For such Contracts, interest accrued as
of the Due Date is paid first, and then the remaining payment is applied to the
unpaid principal balance. Accordingly, if an Obligor pays the fixed monthly
installment in advance of the Due Date, the portion of the payment allocable to
interest for the period since the preceding payment will be less than it would
be if the payment were made on the Due Date, and the portion of the payment
allocable to reduce the principal balance will be correspondingly greater.
Conversely, if an Obligor pays the fixed monthly installment after its Due Date,
the portion of the payment allocable to interest for the period since the
preceding payment will be greater than it would be if the payment were made on
the Due Date, and the portion of the payment allocable to reduce the principal
balance will be correspondingly smaller. When necessary, an adjustment will be
made at the maturity of the Contract to the scheduled final payment to reflect
the larger or smaller, as the case may be, allocations of payments to the amount
financed under the Contract as a result of early or late payments, as the case
may be.
- 13 -
<PAGE> 20
"Simple Interest Method" means the method for calculating interest on a
Contract whereby interest due is calculated each day based on the actual
principal balance of the Contract on that day.
"Spread Account" means the account so denominated and provided for in
the Insurance Agreement.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw- Hill Companies, Inc., or its successor in interest.
"Successor Custodian" shall have the meaning as set forth in Section
2.4(b).
"Title Document" means, with respect to any Financed Vehicle, the
certificate of title for, or other evidence of ownership of, such Financed
Vehicle issued by the Registrar of Titles in the jurisdiction in which such
Financed Vehicle is registered. For Financed Vehicles registered in the State of
California, Title Document may consist of electronic evidence of ownership on
the Electronic Lien and Title system of the California Department of Motor
Vehicles.
"Transfer Agent" shall mean the Person acting as such as provided in
Section 5.3.
"Trust" means the Onyx Acceptance Grantor Trust, 199_-_ created by this
Agreement.
"Trust Estate" has the meaning set forth in Section 2.1 hereof. The
Spread Account and the Payahead Account and amounts on deposit therein and
credited thereto shall not be part of the Trust Estate.
"Trustee" means ________________, a _____________ banking corporation,
until a successor Person shall have become the Trustee pursuant to the
applicable provisions of this Agreement, and thereafter "Trustee" shall mean
such successor Person.
"UCC" means the Uniform Commercial Code as in effect, as applicable, in
California, Arizona, Colorado, Florida, Georgia, Idaho, Illinois, Indiana,
Missouri, Montana, New Jersey, Nevada, New Jersey, Oregon, Texas, Utah, Virginia
or Washington, or if the context requires, any other applicable state.
SECTION 1.2 Usage of Terms.
With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to "writing" include printing, typing, lithography, and
other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all amendments, modifications and
supplements thereto or any changes therein entered into in accordance with their
respective terms and not prohibited by this Agreement; references to Persons
include their permitted successors and assigns; and the term "including" means
"including without limitation."
- 14 -
<PAGE> 21
SECTION 1.3 Section References.
All section references, unless otherwise indicated, shall be to Sections
in this Agreement.
SECTION 1.4 Calculations.
Except as otherwise provided in this Agreement, all interest rate and
basis point calculations under this Agreement will be made on the basis of a
360-day year and twelve thirty-day months and will be carried out to at least
three decimal places. Collections of interest on Rule of 78's Contracts shall be
calculated as if such Contracts were actuarial contracts the scheduled principal
balances of which are the Scheduled Balances thereof.
SECTION 1.5 Accounting Terms.
All accounting terms used but not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States.
ARTICLE II
Conveyance of the Contracts; Representation and Warranties of the Seller
SECTION 2.1 Sale and Assignment of Contracts.
(a) In consideration of the Trustee's delivery to, or upon the order of,
the Seller of authenticated Certificates in an aggregate amount equal to the
Original Pool Balance, the Seller hereby sells, grants, transfers, conveys and
assigns to the Trustee on behalf of the Trust for the benefit of the
Certificateholders and the Insurer, without recourse (except as expressly
provided in Section 2.3 hereof) effective upon the Closing Date, all of its
right, title and interest in, to and under:
(i) the Contracts listed in the Schedule of Contracts including,
without limitation, all payments of Monthly P&I due on or after the
Cut-Off Date, all Net Liquidation Proceeds and Net Insurance Proceeds
with respect to any Financed Vehicle to which a Contract relates
received on or after the Cut-Off Date and all other proceeds received on
or after the Cut-Off Date in respect of such Contracts and any and all
security interests in the Financed Vehicles;
(ii) the Contract Documents relating to the Contracts (except the
Contract Documents for Contracts which have been the subject of a Full
Prepayment received on or after the Cut-Off Date but no later than two
Business Days prior to the Closing Date, in lieu of which the Seller
shall have deposited in or credited to the Collection Account on or
prior to the Closing Date an amount equal to such Full Prepayment);
(iii) all amounts on deposit in the Collection Account, including
all Eligible Investments credited thereto (but excluding investment
earnings thereon);
- 15 -
<PAGE> 22
(iv) the right of the Seller, as purchaser under the Purchase
Agreement, to cause Onyx as seller thereunder to repurchase Contracts
listed in the Schedule of Contracts under certain circumstances;
(v) the security interest of the Seller in the Financed Vehicles
and the rights to receive proceeds from claims on certain insurance
policies covering the Financed Vehicles or the individual Obligors under
each related Contract;
(vi) the Seller's right to proceeds under the Blanket Insurance
Policy; and
(vii) all proceeds in any way delivered with respect to the
foregoing, all rights to payments with respect to the foregoing and all
rights to enforce the foregoing.
The foregoing items of property listed in this Section 2.1, together
with the rights of the Trustee under the Financial Guarantee Insurance Policy,
are the Trust Estate.
It is the intention of the Seller and the Trustee that the assignment
and transfer herein contemplated constitute (and shall be construed and treated
for all purposes as) a true and complete sale of the Trust Estate (other than
the Financial Guarantee Insurance Policy), conveying good title thereto free and
clear of any liens and encumbrances, from the Seller to the Trust. However, in
the event that such conveyance is deemed to be a pledge to secure a loan (in
spite of the express intent of the parties hereto that this conveyance
constitutes (and shall be construed and treated for all purposes) as a true and
complete sale), the Seller hereby grants to the Trustee on behalf of the Trust
for the benefit of the Certificateholders a first priority perfected security
interest in all of the Seller's right, title and interest in the Trust Estate
whether now existing or hereafter created (other than the Financial Guarantee
Insurance Policy), and all proceeds of the foregoing to secure the loan deemed
to be made in connection with such pledge and, in such event, this Agreement
shall constitute a security agreement under applicable law.
(b) In connection with the sale of the Contracts pursuant to the
Purchase Agreement, Onyx has filed with the office of the Secretary of State of
the State of California UCC-1 financing statements naming Onyx as seller and
including the Contracts in the description of the assets being sold thereunder.
In connection with the sale of the Contracts pursuant to this Agreement, the
Seller has filed or caused to be filed UCC-1 financing statements, executed by
the Seller as seller, naming the Trust as purchaser and describing the Contracts
as the assets being sold by it to the Trust, with the office of the Secretary of
State of the State of California. The Seller shall have caused UCC-2 termination
statements to have been filed with the office of Secretary of State of the State
of California terminating any effective UCC-1 financing statements with respect
to any outstanding security interests in the Contracts. From time to time, the
Servicer shall cause to be taken such actions as are necessary to continue the
perfection of the Trust's ownership interest in the Contracts and to continue
the first priority security interest of the Trust in the Financed Vehicles and
their proceeds (other than, as to such priority, any statutory lien arising by
operation of law after the Closing Date which is prior to such interest),
including, without limitation, the filing of financing statements, amendments
thereto or continuation statements and the making of notations on records or
documents of title.
- 16 -
<PAGE> 23
(c) If any change in the name, identity or corporate structure of Onyx,
the Seller or the relocation of the chief executive office of any of them would
make any financing or continuation statement or notice of lien filed under this
Agreement misleading within the meaning of applicable provisions of the UCC or
any title statute, the Servicer, within the time period required by applicable
law, shall file such financing statements or amendments as may be required to
preserve and protect the interests of the Trustee, on behalf of the Trust for
the benefit of the Certificateholders and the Insurer, in the Contracts and in
the related Financed Vehicles and proceeds thereof. Promptly thereafter, and in
any event within 30 days of such change or relocation, the Servicer shall
deliver to the Trustee an Opinion of Counsel stating that, in the opinion of
such counsel, all financing statements or amendments necessary fully to preserve
and protect such interests of the Trustee in the Contracts and in the related
Financed Vehicles and proceeds thereof have been filed, and reciting the details
of such filings.
(d) During the term of this Agreement, the Seller and Onyx shall each
maintain its chief executive office in one of the states of the United States.
(e) The Servicer shall pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
Persons other than the Trustee, of the Trust's right, title and interest in and
to the Contracts and in connection with maintaining the first priority security
interest in the related Financed Vehicles and the proceeds of such Financed
Vehicles.
SECTION 2.2 Representations and Warranties.
The Seller represents and warrants to the Trustee and the Trust for the
benefit of the Certificateholders and the Insurer as follows:
(a) As to the Seller:
(i) the Seller is duly organized and validly existing as a
corporation organized and existing and in good standing under the laws
of the State of Delaware, with power and authority to own its properties
and to conduct its business and had at all relevant times, and has,
power, authority, and legal right to originate or acquire and own the
Contracts;
(ii) the Seller is duly qualified to do business as a foreign
corporation in good standing, and shall have obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such
qualifications;
(iii) the Seller has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Seller has full
power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trustee on behalf of the Trust as
part of the Trust and has duly authorized such sale and assignment to
the Trustee on behalf of the Trust by all necessary corporate action;
and the execution, delivery, and performance of this Agreement has been
duly authorized by the Seller by all necessary corporate action;
- 17 -
<PAGE> 24
(iv) this Agreement constitutes (A) a valid sale, transfer, and
assignment of the Contracts, enforceable against creditors of and
purchasers from the Seller and (B) a legal, valid, and binding
obligation of the Seller enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability shall be considered in a
proceeding in equity or at law;
(v) the consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the Certificate of Incorporation or Bylaws of the Seller, or any
indenture, agreement, or other instrument to which the Seller is a party
or by which it shall be bound; nor result in the creation or imposition
of any Lien upon any of the properties of the Seller pursuant to the
terms of any such indenture, agreement, or other instrument (other than
this Agreement); nor violate any law or any order, rule, or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Seller or its properties;
and
(vi) to the Seller's best knowledge after due inquiry, there are
no proceedings or investigations pending, or threatened, before any
court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Seller or its properties:
(A) asserting the invalidity of this Agreement or the Certificates, (B)
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement, (C) seeking
any determination or ruling that might materially and adversely affect
the performance by the Seller of its obligations under, or the validity
or enforceability of, this Agreement or the Certificates, or (D) naming
the Seller which might adversely affect the federal income tax
attributes of the Certificates.
(b) As to each Contract (except as noted below as being applicable only
to either Rule of 78's Contracts or Simple Interest Contracts):
(i) the information pertaining to such Contract set forth in the
related Schedule of Contracts was true and correct in all material
respects at the Closing Date and the calculations of the Scheduled
Balances appearing in such Schedule of Contracts for each such Contract
at the Cut-Off Date, and in the case of Rule of 78's Contracts at each
Distribution Date thereafter prior to the related Maturity Date, have
been performed in accordance with this Agreement and are accurate;
(ii) as of the Closing Date, such Contract was secured by a valid
and enforceable first priority security interest in favor of Onyx in the
related Financed Vehicle, and such security interest has been duly
perfected and is prior to all other liens upon and security interests in
such Financed Vehicle which now exist or may hereafter arise or be
created (except, as to priority, for any lien for unpaid taxes or unpaid
storage or repair charges which may arise after the Closing Date); such
security interest had been assigned by Onyx to the
- 18 -
<PAGE> 25
Seller pursuant to the Purchase Agreement and, as of the Closing Date,
has been assigned by the Seller to the Trust pursuant to Section
2.1(a)(i) hereof;
(iii) (A) if the related Financed Vehicle was originated in a
state in which notation of a security interest on the Title Document (or
in the electronic title records, in the case of the State of California)
is required or permitted to perfect such security interest, the Title
Document or the electronic title records for such Financed Vehicle
shows, or, if a new or replacement Title Document is being applied for
with respect to such Financed Vehicle, the Title Document will be
received within 180 days of the Closing Date and will show, Onyx or a
subsidiary of Onyx named as the original secured party under the related
Contract as the holder of a first priority security interest in such
Financed Vehicle, and (B) if the related Financed Vehicle was originated
in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in motor vehicles, such filings
or recordings have been duly made and show Onyx or a subsidiary of Onyx
named as the original secured party under the related Contract, and in
either case, the Trustee on behalf of the Trust has the same rights as
such secured party has or would have (if such secured party were still
the owner of such Contract) against all parties claiming an interest in
such Financed Vehicle. With respect to each Contract for which the Title
Document has not yet been returned from the Registrar of Titles (or
evidenced in the electronic title records, in the case of the State of
California), Onyx has written evidence that such Title Documents showing
Onyx or a subsidiary of Onyx as first lienholder have been applied for;
(iv) as of the Closing Date, the Seller had good and marketable
title to and was the sole owner of each Contract to be transferred to
the Trust pursuant to Section 2.1 free of liens, claims, encumbrances
and rights of others and, upon transfer of such Contract to the Trustee
pursuant to Section 2.1, the Trust will have good and marketable title
to, will have a first priority perfected security interest in and will
be the sole owner of such Contract free of liens, encumbrances and
rights of others;
(v) as of the Cut-Off Date, the most recent scheduled payment due
on each such Contract had been made or was not delinquent more than 30
days and, to the best of the Seller's knowledge, all payments on the
Contract were made by the related Obligors;
(vi) as of the Closing Date, there is no lien against the related
Financed Vehicle for delinquent taxes;
(vii) as of the Closing Date, there is no right of rescission,
offset, defense or counterclaim to the obligation of the related
Obligor(s) to pay the unpaid principal or interest due under such
Contract; the operation of the terms of such Contract or the exercise of
any right thereunder will not render such Contract unenforceable in
whole or in part or subject such Contract to any right of rescission,
offset, defense or counterclaim, and the Seller has no knowledge that
such right of rescission, offset, defense or counterclaim has been
asserted or threatened;
(viii) as of the Closing Date, to the best of the Seller's
knowledge, there are no liens or claims which have been filed, including
liens for work, labor, material or storage
- 19 -
<PAGE> 26
affecting the related Financed Vehicle which are or may become a lien
prior to or equal with the security interest granted by such Contract;
(ix) such Contract, and the sale of the Financed Vehicle sold
thereunder, complied, at the time it was made, in all material respects
with all applicable federal, state and local laws (and regulations
thereunder), including without limitation usury, equal credit
opportunity, fair credit reporting, truth-in-lending or other similar
laws, the Federal Trade Commission Act, and applicable state laws
regulating retail installment sales contracts and loans in general and
motor vehicle retail installment contracts and loans in particular; and
the consummation of the transactions herein contemplated, including,
without limitation, the transfer of ownership of the Contracts to the
Trustee and the receipt of interest by the Certificateholders, will not
violate any applicable federal, state or local law;
(x) such Contract is the legal, valid and binding obligation of
the related Obligor(s) thereunder and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally; each party to such Contract had full legal capacity to
execute and deliver such Contract and all other documents related
thereto and to grant the security interest purported to be granted
thereby; the terms of such Contract have not been waived, amended or
modified in any respect, except by instruments that are part of the
related Contract Documents, and no such waiver, amendment or
modification has caused such Contract to fail to meet all of the
representations, warranties and conditions, set forth herein with
respect thereto;
(xi) such Contract contains customary and enforceable provisions
such as to render the rights and remedies of the holder or assignee
thereof adequate for the practical realization against the collateral of
the benefits of the security, subject, as to enforceability, to
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally;
(xii) as of the Closing Date, there was no default, breach,
violation or event permitting acceleration existing under such Contract
(except payment delinquencies permitted by subparagraph (v) above) and
no event which, with notice and the expiration of any grace or cure
period, would constitute such a default, breach, violation or event
permitting acceleration under such Contract, and the Seller has not
waived any such default, breach, violation or event permitting
acceleration except payment delinquencies permitted by subparagraph (v)
above;
(xiii) at the Closing Date each related Financed Vehicle will be
covered by the Blanket Insurance Policy; each of Onyx and the Seller
shall at all times comply with all of the provisions of such insurance
policy applicable to it;
(xiv) at the Closing Date, (a) such Contract will require that
the related Obligor(s) obtain and maintain in effect for the related
Financed Vehicle a comprehensive and collision insurance policy (i) in
an amount at least equal to the lesser of (x) its maximum insurable
value or (y) the principal amount due from the related Obligor(s) under
such Contract, (ii)
- 20 -
<PAGE> 27
naming Onyx or a subsidiary of Onyx as a loss payee and (iii) insuring
against loss and damage due to fire, theft, transportation, collision
and other risks generally covered by comprehensive and collision
coverage and (b) the Servicer shall have put in place a vendor's single
interest insurance policy providing coverage upon repossession of the
related Financed Vehicle in an amount equal to the lesser of the actual
cash value of such Financed Vehicle, the cost of repair or replacement
for such Financed Vehicle and the unpaid balance of the related
Contract. Each of Onyx and the Seller shall, and Onyx shall cause any
subsidiary of Onyx which originated a Contract to, at all times comply
with all of the provisions of such insurance policies applicable to it;
(xv) such Contract was either originated by a subsidiary of Onyx,
purchased by a subsidiary of Onyx or acquired by Onyx from a Dealer with
which it ordinarily does business, and no adverse selection procedures
have been utilized in selecting such Contract from all other similar
contracts purchased or originated by Onyx or any such subsidiary;
(xvi) payments under such Contract have been applied in
accordance with the Rule of 78's or the Simple Interest Method, as
provided in the applicable Contract, and are due monthly in
substantially equal amounts through its Maturity Date sufficient to
fully amortize the principal balance of such Contract by its Maturity
Date;
(xvii) there is only one original of such Contract and such
original, together with all other related Contract Documents, is being
held by the Trustee; provided, however, that upon the execution by the
Trustee and the Servicer of a letter agreement revocably appointing the
Servicer as agent of the Trustee to act as custodian of the Contract
Documents in accordance with Section 2.4, such original Contracts
together with all other Contract Documents may be held by the Servicer.
Each original Contract has been segregated to show the Trust as owner
thereof, unless the Insurer has waived the requirement for such
segregation by notice in writing to the Trustee and the Servicer;
(xviii) as of the Closing Date, the Servicer has clearly marked
its electronic records to indicate that such Contract is owned by the
Trust;
(xix) at the Cut-Off Date, such Contract has a Maturity Date no
later than _______, 200_;
(xx) at the date of origination of the Contract, the original
principal balance of such Contract was not greater than the purchase
price to the related Obligor(s) (including taxes, warranties, licenses
and related charges) of the related Financed Vehicle;
(xxi) as of the Cut-Off Date, the Seller has not received notice
that any Obligor under such Contract has filed for bankruptcy;
(xxii) the related Obligor(s) were located in either California,
Arizona, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Missouri,
Montana, New Jersey, New York, Nevada, Oregon, Texas, Utah, Virginia or
Washington on the date of origination of such Contract;
- 21 -
<PAGE> 28
(xxiii) the yield (using the Recomputed Yield for Rule of 78's
Contracts) on such Contract is at least equal to _____%;
(xxiv) as of the Cut-Off Date, such Contract had an original
maturity of not more than __ months and such Contract has a remaining
maturity of __ months or less;
(xxv) the first payment under such Contract is due on or before
_____, 199_;
(xxvi) as of the Cut-Off Date, such Contract has a remaining
principal balance of at least $______; and
(xxvii) as of the Cut-Off Date, such Contract is secured by a
Financed Vehicle that has not been repossessed without reinstatement.
(c) As to all of the Contracts:
(i) the aggregate Outstanding Principal Balance payable by
Obligors of the Contracts as of the Cut-Off Date equals the Original
Pool Balance; and
(ii) as of the Cut-Off Date, approximately ______% of the
Outstanding Principal Balance of all Contracts is attributable to loans
to purchase new Financed Vehicles and approximately _______% of the
Outstanding Principal Balance of all Contracts is attributable to used
Financed Vehicles.
(d) None of the foregoing representations and warranties shall be
construed as, and the Seller is specifically not making, any representations and
warranties regarding the collectibility of the Contracts or the future
performance of the Contracts.
(e) The Seller has not prepared any financial statement which accounts
for the transfer of the Trust Estate (other than the Financial Guarantee
Insurance Policy) hereunder to the Trust in any manner other than a sale of the
Trust Estate (other than the Financial Guarantee Insurance Policy) by it to the
Trust, and the Seller has not in any other respect (including, but not limited
to, for accounting and tax reporting purposes) accounted for or treated the
transfer of the Trust Estate (other than the Financial Guarantee Insurance
Policy) hereunder in any manner other than as a sale and absolute assignment to
the Trust of the Seller's full right, title and ownership interest in the Trust
Estate (other than the Financial Guarantee Insurance Policy) to the Trust.
SECTION 2.3 Repurchase of Certain Contracts.
The representations and warranties of the Seller set forth in Section
2.2 with respect to each Contract shall survive delivery of the Contract
Documents to the Trustee and shall continue until the termination of this
Agreement. Upon discovery by the Seller, the Servicer, the Insurer or a
Responsible Officer of the Trustee that any of such representations or
warranties was incorrect or that any of such conditions was unsatisfied as of
the time made or that any of the Contract Documents relating to any such
Contract has not been properly executed by the Obligor or contains a material
defect or has not been received by the Trustee (or the Servicer in its capacity
as custodian
- 22 -
<PAGE> 29
of the Trustee pursuant to Section 2.4), such Person making such discovery shall
give prompt notice to the other such Persons. If any such defect, incorrectness
or omission materially and adversely affects the interest of the
Certificateholders, the Trustee or the Insurer, the Seller shall cure the defect
or eliminate or otherwise cure the circumstances or condition in respect of
which such condition, representation or warranty was incorrect as of the time
made; provided that if the Seller is unable to do so by the last day of the
Collection Period following the Collection Period (or, if the Seller elects, the
last day of such Collection Period) during which the Seller becomes aware of or
receives written notice from the Trustee, the Insurer or the Servicer of such
defect, incorrectness or omission, it shall repurchase such Contract on the last
day of the applicable Collection Period from the Trust at the Repurchase Amount
in the manner set forth in Section 4.4. Upon any such repurchase, the Trustee on
behalf of the Trust shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as shall be necessary to vest in the
Seller any Contract purchased hereunder. The sole remedy of the Trustee, the
Trust, or the Certificateholders with respect to a breach of the Seller's
representations and warranties pursuant to Section 2.2 shall be to require the
Seller to repurchase Contracts pursuant to this Section provided, however, that
the Seller shall indemnify the Trustee, its officers, directors, agents and
employees, the Insurer, the Trust and the Certificateholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third-party claims arising out of the events or facts giving rise to
such breach.
SECTION 2.4 Duties and Appointment of Custodian.
(a) Duties of Custodian. The Trustee, and any Custodian appointed
pursuant to Section 2.4(b), while acting as Custodian shall:
(i) segregate and maintain continuous custody of the Contract
Documents in secure and fireproof facilities in accordance with
customary standards for such custody;
(ii) with respect to the Contract Documents, (A) act exclusively
as the Custodian for the benefit of the Certificateholders and for the
Insurer and (B) hold all Contract Documents for the exclusive use
(notwithstanding Sections 2.4(a)(iii) and 2.4(a)(iv) below) and for the
benefit of the Certificateholders and the Insurer;
(iii) to the extent the Servicer directs the Custodian in
writing, deliver certain specified Contract Documents to the Servicer to
enable the Servicer to service the Contracts pursuant to this Agreement.
At such time as the Servicer returns such Contract Documents to the
Custodian, the Servicer shall provide written notice of such return to
the Custodian. The Custodian shall acknowledge receipt of the returned
materials by signing the Servicer's notice and shall promptly send
copies of such acknowledgment or receipt to the Servicer;
(iv) upon reasonable prior written notice, permit the Servicer
and the Insurer to examine the Contract Documents in the possession, or
under the control, of the Custodian; and
(v) at its own expense, maintain at all times while acting as
Custodian, and keep in full force and effect (A) fidelity insurance, (B)
theft of documents insurance, (C) fire
- 23 -
<PAGE> 30
insurance, and (d) forgery insurance. All such insurance shall be in
amounts, with standard coverage and subject to deductibles, as are
customary for similar insurance typically maintained by banks that act
as custodian in similar transactions.
(b) Appointment of Custodian. As of the Closing Date, the Trustee shall
be the Custodian of the Contract Files; provided, however, that upon the
execution by the Trustee of a letter agreement with the consent of the Insurer
(such consent not to be unreasonably withheld) substantially in the form of
Exhibit A attached hereto (the "Appointment of Custodian"), revocably appointing
the Servicer or such other entity acceptable to the Insurer as agent of the
Trustee to act as Custodian (the "Successor Custodian") of the Contract
Documents, such Successor Custodian shall be so appointed and shall from the
effective date of such Appointment of Custodian retain custody of the Contract
Documents and any and all other documents relating to a Contract or the related
Obligor or Financed Vehicle. As of the effective date of such Appointment of
Custodian, the Contract Documents and any and all other documents relating to a
Contract or the related Obligor or Financed Vehicle will be delivered to the
Successor Custodian in its capacity as agent of the Trustee acting as Custodian.
If the Servicer is appointed Successor Custodian as of the date
specified in the Appointment of Custodian, the Servicer shall maintain the
Contract Documents held by it in a file area physically separate from the other
installment sales contracts owned or serviced by it or any of its Affiliates,
which area shall be clearly marked to indicate the Trust as the owner of, and
the holder of the security interest in, the Contract Documents; except that if
the Insurer has waived the requirement for such segregation by notice in writing
to the Trustee and the Servicer, such file area may contain contract documents
for other installment sales contracts serviced by the Servicer.
SECTION 2.5 Duties of Servicer Relating to the Contracts.
(a) Safekeeping. The Servicer, in its capacity as servicer, shall
maintain such accurate and complete accounts, records, and computer systems
pertaining to each Contract File as shall enable the Trustee to comply with this
Agreement. In performing its duties as servicer the Servicer shall act with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to the files relating to all comparable automobile
contracts that the Servicer services for itself or others. The Servicer shall:
(i) conduct, or cause to be conducted, periodic physical inspections of the
Contract Files (other than the Contract Documents, unless the Servicer is acting
as Custodian) held by it under this Agreement, and of the related accounts,
records, and computer systems; (ii) maintain the Contract Files in such a manner
as shall enable the Trustee and the Insurer to verify the accuracy of the
Servicer's record keeping; (iii) promptly report to the Trustee and the Insurer
any failure on its part to hold the Contract Files (other than the Contract
Documents, unless the Servicer is acting as Custodian) and maintain its
accounting, records, and computer systems as herein provided; and (iv) promptly
take appropriate action to remedy any such failure.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Contract File (other than the Contract Documents, unless the Servicer is
acting as Custodian) at the address of the Servicer set forth in Section 11.5,
or at such other location as shall be specified to the Trustee and the Insurer
by 30 days' prior written notice. The Servicer shall permit the Trustee or the
Insurer or their duly authorized representatives, attorneys, or auditors to
inspect the Contract Files and the
- 24 -
<PAGE> 31
related accounts, records, and computer systems maintained by the Servicer at
such times as the Trustee or the Insurer may request.
(c) Release of Documents. If the Servicer is acting as Custodian
pursuant to Section 2.4, upon instruction from the Trustee (a copy of which
shall be furnished to the Insurer), the Servicer shall release any document in
the Contract Files to the Trustee, the Trustee's agent, or the Trustee's
designee, as the case may be, at such place or places as the Trustee may
designate, as soon as practicable.
(d) Monthly Reports. On the Servicer Report Date of each month,
commencing with the month of the Closing Date, the Servicer shall deliver to the
Trustee and Insurer, a certificate of a Servicing Officer stating (i) the
Contract Number and outstanding principal balance of each Contract that has
become a Liquidated Contract since the Business Day immediately preceding the
date of the last certificate delivered pursuant to this Section 2.5(d) (or since
the Closing Date in the case of the first such certificate); (ii) that, if such
Contract has been the subject of a Full Prepayment pursuant to clause (a) of the
definition of the term "Full Prepayment" or is a Liquidated Contract pursuant to
clause (iii) of the definition of the term "Liquidated Contract," all proceeds
received in respect thereof have been deposited in or credited to the Collection
Account in accordance with Section 4.2; (iii) that, if such Contract has been
the subject of a Full Prepayment pursuant to clause (b) of the definition of the
term "Full Prepayment," the correct Repurchase Amount has been deposited in or
credited to the Collection Account in accordance with Section 4.4; (iv) that, if
such Contract is a Liquidated Contract pursuant to clause (ii) of the definition
of the term "Liquidated Contract," there have been deposited in or credited to
the Collection Account the related Net Liquidation Proceeds in accordance with
Section 4.2; and (v) that the Trustee is authorized to release such Contract and
the related Contract Documents as provided herein.
(e) Schedule of Title Documents. The Servicer shall deliver to the
Trustee and the Insurer (i) within 60 days of the Closing Date, a schedule of
Title Documents which as of the Closing Date did not show Onyx or a subsidiary
of Onyx as first lienholder and (ii) within 180 days of the Closing Date as to
the Contracts, a schedule of Title Documents which as of the date prior to such
delivery do not show the Onyx or a subsidiary of Onyx as first lienholder and as
to which the Seller is obligated to repurchase pursuant to the provisions
hereof.
(f) Electronic Marking of Contracts; Possession. The Servicer shall
cause the electronic record of the Contracts maintained by it to be clearly
marked to indicate that the Contracts have been sold to the Trust and shall not
in any way assert or claim an ownership interest in the Contracts. It is
intended that pursuant to the applicable provisions of Sections 2.4 and 2.5
hereof and the Appointment of Custodian, the Trustee on behalf of the Trust
shall be deemed to have possession of the Contract Documents for purposes of
Section 9-305 of the UCC of the State in which the Contract Documents are
located.
SECTION 2.6 Instructions; Authority to Act.
The Servicer shall be deemed to have received proper instructions (a
copy of which shall be furnished to the Insurer) with respect to the Contract
Files upon its receipt of written instructions signed by a Responsible Officer
of the Trustee.
- 25 -
<PAGE> 32
SECTION 2.7 Indemnification.
The Servicer, as custodian, shall indemnify the Trustee and its
officers, directors, agents and employees, the Insurer, the Trust and the
Certificateholders for any and all liabilities, obligations, losses,
compensatory damages, payments, costs, or expenses of any kind whatsoever
(including the reasonable fees and expenses of counsel) that may be imposed on,
incurred, or asserted against the Trustee, the Insurer, the Trust and the
Certificateholders as the result of any act or omission in any way relating to
the maintenance and custody by the Servicer of the Contract Files, or the
failure of the Servicer to perform its duties and service the Contracts in
compliance with the terms of this Agreement; provided, however, that the
Servicer shall not be liable for any portion of any such amount resulting from
the willful misfeasance, bad faith, or gross negligence of the Trustee or the
Insurer. The Servicer shall also indemnify and hold harmless the Trust, the
Trust Estate, the Trustee, the Insurer and the Certificateholders against any
taxes that may be asserted at any time against any of them with respect to the
Contracts, including any sales, gross receipts, general corporation, personal
property, privilege or license taxes (but exclusive of federal or other income
taxes arising out of payments on the Contracts) and the costs and expenses in
defending against such taxes. The Servicer shall immediately notify the Trustee
if a claim is made by a third party with respect to the Contracts, shall assume,
with the consent of the Trustee, the defense of any such claim and shall pay all
expenses in connection therewith, including counsel fees, and shall promptly
pay, discharge and satisfy any judgment or decree which may be entered against
it, the Trustee or the Trust with respect to the Contracts.
SECTION 2.8 Effective Period and Termination.
The Trustee's appointment as Custodian shall become effective as of the
Closing Date and shall continue in full force and effect until the earlier of
(i) the execution of the Appointment of Custodian, (ii) the removal of the
Trustee pursuant to Section 9.10 or (iii) the Final Distribution Date. Following
the execution of the Appointment of Custodian, the Successor Custodian's
appointment as Custodian shall continue in full force and effect until
terminated under this Section 2.8 or until the Final Distribution Date,
whichever occurs first. If Onyx shall resign as Servicer under Section 7.4 or if
all of the rights and obligations of the Servicer shall have been terminated
under Section 8.1, the appointment of the Servicer as Custodian may be
terminated by the Trustee, the Insurer, or by the Holders of Certificates
evidencing in the aggregate at least 25% of the Pool Balance, in the same manner
as the Trustee, the Insurer, or such Holders may terminate the rights and
obligations of the Servicer under Section 8.1 (but no occurrence of an Event of
Default shall be a precondition to termination). As soon as practicable after
any termination of such appointment, the Custodian shall, at its own expense,
deliver or cause the delivery of the Contract Files to the Trustee or the
Trustee's agent at such place or places as the Trustee may reasonably designate
and shall cooperate in good faith to effect such delivery. The foregoing
notwithstanding, if the Servicer is acting as Custodian, the Servicer shall, at
the request of the Insurer, redeliver the Contract Documents to the Trustee in
the event that such redelivery is required by any Rating Agency to consider the
Certificates investment grade without consideration of the Financial Guarantee
Insurance Policy.
- 26 -
<PAGE> 33
SECTION 2.9 Nonpetition Covenant.
(a) Neither the Seller nor the Servicer shall petition or otherwise
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Trust under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Trust or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust.
(b) The Servicer shall not, nor cause the Seller to, petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Seller under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Seller or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Seller.
SECTION 2.10 Collecting Title Documents Not Delivered at the Closing
Date.
In the case of any Contract in respect of which, in place of a Title
Document, the Trustee received on the Closing Date written evidence from the
Dealer selling the related Financed Vehicle, or from Onyx, that the Title
Document for such Financed Vehicle showing Onyx or a subsidiary of Onyx as first
lienholder has been applied for from the Registrar of Titles, the Servicer shall
use its best efforts to collect (or, in the case of the State of California, to
obtain evidence in the electronic title records of) such Title Document from the
Registrar of Titles as promptly as possible. If such Title Document showing Onyx
or a subsidiary of Onyx as first lienholder is not received by the Servicer (or,
in the case of the State of California, verified by the Servicer in the
electronic title records) within 180 days after the Closing Date with respect to
the Contracts, then the representation and warranty in Section 2.2(b)(iii) as to
such Contracts in respect of such Contract shall be deemed to have been
incorrect in a manner that materially and adversely affects the
Certificateholders and the Seller shall be obligated to repurchase such Contract
in accordance with Section 2.3.
ARTICLE III
Administration and Servicing of Contracts
SECTION 3.1 Duties of Servicer.
The Servicer shall manage, service, administer, and make collections on
the Contracts. The Servicer agrees that its servicing of the Contracts shall be
carried out in accordance with reasonable care and, to the extent more exacting,
the procedures used by the Servicer in respect of such contracts serviced by it
for its own account; provided, however, that, subject to Section 3.2 as to
extensions, the Servicer shall not release or waive the right to collect the
unpaid balance of any Contract. The Servicer's duties shall include collection
and posting of all payments, responding to inquiries of Obligors on the
Contracts, investigating delinquencies, sending payment coupons to Obligors,
reporting tax information to Obligors, accounting for collections, furnishing
monthly and annual statements to the Trustee and the Insurer with respect to
distributions and the preparation of U.S.
- 27 -
<PAGE> 34
Grantor Trust Tax Returns (Form 1041) for the Trustee to sign and file on
an annual basis, based on a tax year for the Trust that is the calendar year and
any other tax forms required by any federal, state or local tax authority
including with respect to original issue discount, if any. The Servicer shall
have, subject to the terms hereof, full power and authority, acting alone, and
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with such managing, servicing,
administration, and collection that it may deem necessary or desirable;
provided, however, that the Servicer shall commence repossession efforts in
respect of any Financed Vehicle any payment on the related Contract of which is
four or more months delinquent. Without limiting the generality of the
foregoing, but subject to the provisions of this Agreement, the Servicer is
authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trust, the Insurer, the Certificateholders, or the Trustee or any of
them, any and all instruments of satisfaction or cancellation, or partial or
full release or discharge, and all other comparable instruments, with respect to
the Contracts or to the Financed Vehicles. The Trustee shall furnish the
Servicer any documents necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties hereunder. The Servicer may engage
agents and subservicers to fulfill its duties hereunder; provided, however, that
the Servicer shall remain at all times personally liable for the acts (and
failures to act) of such agents and subservicers.
On or prior to the Closing Date, the Servicer shall deliver to the
Insurer and the Trustee a list of Servicing Officers of the Servicer involved
in, or responsible for, the administration and servicing of the Contracts, which
list shall from time to time be updated by the Servicer on request of the
Trustee or the Insurer.
On the Closing Date, the Servicer shall deposit in the Collection
Account (i) all installments of Monthly P&I due on or after the Cut-Off Date and
received by the Servicer at least two Business Days prior to the Closing Date;
(ii) the proceeds of each Full Prepayment of any Contract and all partial
prepayments on Simple Interest Contracts received by the Servicer on or after
the Cut-Off Date and at least two Business Days prior to the Closing Date; and
(iii) all Net Liquidation Proceeds and Net Insurance Proceeds received with
respect to a Financed Vehicle to which a Contract relates received on or after
the Cut-Off Date and at least two Business Days prior to the Closing Date.
Subject to Section 4.2(a) respecting deposits in the Payahead Account,
the Servicer shall deposit in or credit to the Collection Account within two
Business Days of receipt all collections of Monthly P&I due on or after the
Cut-Off Date received by it on the Contracts together with the proceeds of all
Full Prepayments on all Contracts and all partial prepayments on Simple Interest
Contracts, and any accompanying interest. The Servicer shall likewise deposit in
the Collection Account within two Business Days of receipt all Net Liquidation
Proceeds and Net Insurance Proceeds. As of the last day of each Collection
Period, all amounts received in each Collection Period shall be applied by the
Servicer with respect to each Contract, first, to the Servicer as additional
servicing compensation any amounts due for late fees, extension fees or similar
charges, second to the payment of Monthly P&I, and third, in the case of partial
prepayments on Rule of 78's Contracts, to the Payahead Account. The foregoing
requirements for deposit in the Collection Account are exclusive, it being
understood that collections in the nature of late payment charges or extension
fees may, but need not be deposited in the Collection Account and may be
retained by the Servicer as additional servicing compensation.
- 28 -
<PAGE> 35
With respect to payments of Monthly P&I made by Obligors to the
Servicer's lock box, the Servicer shall direct the Person maintaining the lock
box to deposit the amount collected on the Contracts within one Business Day to
the Clearing Account. Such amounts shall be withdrawn from the Clearing Account
and deposited in the Collection Account no later than the next following
Business Day.
In order to facilitate the servicing of the Contracts by the Servicer,
the Servicer shall retain, subject to and only to the extent permitted by the
provisions of this Agreement, all collections on the Contracts prior to the time
they are remitted or credited, in accordance with such provisions, to the
Collection Account or the Payahead Account, as the case may be. The Servicer
acknowledges that the unremitted collections on the Contracts are part of the
Trust Estate and the Servicer agrees to act as custodian and bailee of the
Trustee and the Insurer in holding such monies and collections. The Servicer
agrees, for the benefit of the Trustee, the Trust, the Certificateholders and
the Insurer, to act as such custodian and bailee, and to hold and deal with such
monies and such collections, as custodian and bailee for the Trustee and the
Insurer, in accordance with the provisions of this Agreement.
The Servicer shall retain all data (including, without limitation,
computerized title records) relating directly to or maintained in connection
with the servicing of the Contracts at the address of the Servicer set forth in
Section 11.5, or, upon 15 days' notice to the Insurer and the Trustee, at such
other place where the servicing offices of the Servicer are located, and shall
give the Trustee and the Insurer access to all data (including, without
limitation, computerized title records) at all reasonable times, and, while an
Event of Default shall be continuing, the Servicer shall, on demand of the
Trustee or the Insurer deliver or cause to be delivered to the Trustee on behalf
of the Trust and to the Insurer all data (including, without limitation,
computerized title records and, to the extent transferable, related operating
software) necessary for the servicing of the Contracts and all monies collected
by it and required to be deposited in or credited to the Collection Account or
the Payahead Account, as the case may be.
SECTION 3.2 Collection of Contract Payments.
The Servicer shall use its best efforts to collect all payments called
for under the terms and provisions of the Contracts as and when the same shall
become due and shall use its best efforts to cause each Obligor to make all
payments in respect of his or her Contract to the Servicer. Consistent with the
foregoing, the Servicer may in its discretion (i) waive any late payment charges
in connection with delinquent payments on a Contract or prepayment charges and
(ii) in order to work out a default or an impending default due to the financial
condition of an Obligor, grant up to three extensions of the Due Date of any
payment for periods of 30 days or less, such that the Maturity Date of no
Contract shall, under any circumstances, extend more than 90 days past the
originally scheduled date of the last payment on such Contract and in no event
beyond the Final Distribution Date. The Servicer shall not extend the Maturity
Date of a Contract except as provided in clause (ii) of the preceding sentence.
Except as explicitly permitted by this paragraph, the Servicer shall not change
any material term of a Contract, including but not limited to the interest rate,
the payment amounts or due dates, or the property securing such Contract.
- 29 -
<PAGE> 36
SECTION 3.3 Realization Upon Contracts.
The Servicer shall use its best efforts, consistent with the servicing
standard specified in Section 3.1, to repossess or otherwise convert the
ownership of the Financed Vehicle securing any Contract as to which no
satisfactory arrangements can be made for collection of delinquent payments.
Such servicing procedures may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
In connection with such repossession or other conversion, the Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual for prudent holders of retail installment sales
contracts and as shall be in compliance with all applicable laws, and, in
connection with the repossession of any Financed Vehicle or any contract in
default, may commence and prosecute any proceedings in respect of such Contract
in its own name or, if the Servicer deems it necessary, in the name of the Trust
or on behalf of the Trust. The Servicer's obligations under this Section are
subject to the provision that, in the case of damage to a Financed Vehicle from
an uninsured cause, the Servicer shall not be required to expend its own funds
in repairing such motor vehicle unless it shall determine (i) that such
restoration will increase the proceeds of liquidation of the related Contract,
after reimbursement to itself for such expenses and (ii) that such expenses will
be recoverable by it either as Liquidation Expenses or as expenses recoverable
under an applicable insurance policy. The Servicer shall be responsible for all
other costs and expenses incurred by it in connection with any action taken in
respect of a Defaulted Contract; provided, however, that it shall be entitled to
reimbursement of such costs and expenses to the extent they constitute
Liquidation Expenses or expenses recoverable under an applicable insurance
policy. All Net Liquidation Proceeds and Net Insurance Proceeds shall be
deposited directly in or credited to the Collection Account (without deposit in
any intervening account) to the extent required by Section 4.2.
SECTION 3.4 Insurance.
The Servicer shall cause to be maintained the Blanket Insurance Policy
with the Trustee as the named payee thereunder with respect to the Contracts.
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles.
The Servicer shall take such steps as are necessary to maintain
continuous perfection and priority of the security interest created by each
Contract in the related Financed Vehicle, including but not limited to,
obtaining the execution by the related Obligor and the recording, registering,
filing, re-recording, re-registering, and refiling of all security agreements,
financing statements, continuation statements or other instruments as are
necessary to maintain the security interest granted by such Obligor under each
respective Contract. The Trustee hereby authorizes the Servicer to take such
steps as are necessary to re-perfect such security interest on behalf of the
Trust in the event of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Contract to the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title (or, if applicable, in the case of the State of California, the
electronic title record), or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to grant to the Trust a perfected security interest in the related
Financed Vehicle, Onyx hereby agrees that the identification of Onyx or a
subsidiary of Onyx as the secured
- 30 -
<PAGE> 37
party on the certificate of title (or, if applicable, in the case of the State
of California, the electronic title record) is deemed to be in its capacity as
agent of the Trust and further agrees to hold such certificate of title (or, if
applicable, in the case of the State of California, the electronic title record)
as the Trustee's agent and custodian; provided that, except as provided in
Section 8.1, neither the Servicer nor Onyx shall make, nor shall the Trustee or
Certificateholders have the right to require that the Servicer or Onyx make, any
such notation on the related Financed Vehicles' certificate of title (or, if
applicable, in the case of the State of California, the electronic title record)
or fulfill any such additional administrative requirement of the laws of the
state in which a Financed Vehicle is located.
SECTION 3.6 Covenants, Representations and Warranties of Servicer.
The Servicer hereby makes the following covenants, representations and
warranties on which the Trustee shall rely accepting the Contracts in trust and
authenticating the Certificates.
(a) The Servicer covenants as to the Contracts:
(i) the Financed Vehicle securing each Contract shall not be
released from the lien granted by the Contract in whole or in part,
except as contemplated herein;
(ii) the Servicer shall not impair the rights of the Trust in the
Contracts;
(iii) the Servicer shall not increase the number of payments
under a Contract, nor increase the amount financed under a Contract, nor
extend or forgive payments on a Contract, except as provided in Section
3.2; and
(iv) the Servicer may consent to the sale or transfer by an
Obligor of any Financed Vehicle if the original Obligor under the
related Contract remains liable under such Contract and the transferee
assumes all of the Obligor's obligations thereunder and upon doing so
the credit profile with respect to such Obligor will not be changed from
adequate to speculative by virtue of the addition of the transferee's
obligation thereunder.
(b) The Servicer represents and warrants as of the Closing Date:
(i) the Servicer (1) has been duly organized, is validly existing
and in good standing as a corporation organized and existing under the
laws of the State of Delaware, (2) has qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where
the character of its properties or the nature of its activities makes
such qualification necessary, and (3) has full power, authority and
legal right to own its property, to carry on its business as presently
conducted, and to enter into and perform its obligations under this
Agreement;
(ii) the execution and delivery by the Servicer of this Agreement
are within the corporate power of the Servicer and have been duly
authorized by all necessary corporate action on the part of the
Servicer. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor compliance
with the
- 31 -
<PAGE> 38
provisions hereof, will conflict with or result in a breach of, or
constitute a default under, any of the provisions of any law,
governmental rule, regulation, judgment, decree or order binding on the
Servicer or its properties or the Certificate of Incorporation or Bylaws
of the Servicer, or any of the provisions of any indenture, mortgage,
contract or other instrument to which the Servicer is a party or by
which it is bound or result in the creation or imposition of any lien,
charge or encumbrance upon any of its property pursuant to the terms of
any such indenture, mortgage, contract or other instrument;
(iii) other than consents that have been obtained prior to the
Closing Date, the Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement;
(iv) this Agreement has been duly executed and delivered by the
Servicer and, assuming the due authorization, execution and delivery
thereof by the Trustee, constitutes a legal, valid and binding
obligation of the Servicer enforceable against the Servicer in
accordance with its terms (subject to applicable bankruptcy and
insolvency laws and other similar laws affecting the enforcement of
creditors' rights generally);
(v) there are no actions, suits or proceedings pending or, to the
knowledge of the Servicer, threatened against or affecting the Servicer,
before or by any court, administrative agency, arbitrator or
governmental body with respect to any of the transactions contemplated
by this Agreement, or which will, if determined adversely to the
Servicer, materially and adversely affect it or its business, assets,
operations or condition, financial or otherwise, or adversely affect the
Servicer's ability to perform its obligations under this Agreement. The
Servicer is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to
materially and adversely affect the transactions contemplated by the
above-mentioned documents; and
(vi) the Servicer has obtained or made all necessary consents,
approvals, waivers and notifications of creditors, lessors and other
nongovernmental persons, in each case, in connection with the execution
and delivery of this Agreement, and the consummation of all the
transactions herein contemplated.
SECTION 3.7 Purchase of Contracts Upon Breach of Covenant.
The Servicer or the Trustee shall inform the other party and the Insurer
promptly, in writing, upon the discovery of any breach of the representation and
warranties set forth in Section 3.6 or of the covenants set forth in Section
3.5. Unless the breach shall have been cured within 30 days following such
discovery or receipt of notice of such breach, the Servicer shall purchase any
Contract materially and adversely affected by such breach from the Trust. As
consideration for the Contract, the Servicer shall remit the Repurchase Amount
on the Business Day preceding the Servicer Report Date next succeeding the end
of such 30-day cure period in the manner specified in Section 4.4. The sole
remedy of the Trustee, the Trust, or the Certificateholders with respect to a
breach pursuant to Section 3.5 (other than as specified therein) and Section 3.6
shall be to require the Servicer to
- 32 -
<PAGE> 39
purchase Contracts pursuant to this Section 3.7; provided, however, that the
Servicer shall indemnify the Trustee and its officers, directors, agents and
employees, the Insurer, the Trust and the Certificateholders against all costs,
expenses, losses damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third-party claims arising out of the events or facts giving rise to
such breach.
Any successor Servicer appointed pursuant to Section 8.2 shall not be
obligated to purchase Contracts pursuant to this Section 3.7 with respect to any
breaches by any prior Servicer.
SECTION 3.8 Servicing Compensation.
As compensation for the performance of its obligations under this
Agreement and subject to the terms of this Section 3.8, the Servicer shall be
entitled to receive on each Distribution Date the Servicing Fee in respect of
each Contract that was Outstanding at the beginning of the Collection Period
ending immediately prior to such Distribution Date; provided, however, that with
respect to the first Distribution Date the Servicer will be entitled to receive
the Servicing Fee in respect of each Outstanding Contract as of the Cut-Off
Date. As servicing compensation in addition to the Servicing Fee, the Servicer
shall be entitled (i) to retain all late payment charges, extension fees and
similar items paid in respect of Contracts, (ii) to receive, in respect of each
Rule of 78's Contract that is prepaid in full prior to its Maturity Date, the
amount by which the outstanding principal balance of such Contract (determined
in accordance with the Rule of 78's method) exceeds the Scheduled Balance of
such Contract at the time of such prepayment and (iii) to receive all investment
earnings on funds credited to the Collection Account and the Payahead Account;
provided, however, that the Servicer agrees that each amount payable to it
pursuant to clause (ii) of this Section 3.8 shall be deposited in the Spread
Account and applied in accordance with the Insurance Agreement. The Servicer
shall pay all expenses incurred by it in connection with its servicing
activities hereunder and shall not be entitled to reimbursement of such expenses
except to the extent provided in Section 3.3.
SECTION 3.9 Reporting by the Servicer.
(a) No later than 3:00 p.m. New York City time on each Servicer Report
Date, the Servicer shall transmit to the Trustee and the Insurer a statement
(the "Distribution Date Statement") setting forth with respect to the next
succeeding Distribution Date:
(i) the Interest Distribution for such Distribution Date;
(ii) the Principal Distribution for such Distribution Date;
(iii) the Certificate Distribution Amount for such Distribution
Date;
(iv) the Premium payable to the Insurer and the amount to be
deposited in the Spread Account;
(v) the aggregate Servicing Fee with respect to the Contracts for
the related Collection Period;
- 33 -
<PAGE> 40
(vi) the number of, and aggregate amount of monthly principal and
interest payments due on, the Contracts which are delinquent as of the
end of the related Collection Period presented on a 30-day, 60-day and
90-day basis;
(vii) the Collection Account Amount Available and the Policy
Claim Amount, if any, for such Distribution Date;
(viii) the aggregate amount of Liquidation Proceeds received for
Defaulted Contracts;
(ix) the net credit losses for the Collection Period;
(x) the number and net outstanding balance of Contracts for which
the Financed Vehicle has been repossessed; and
(xi) the Pool Balance.
Each such Distribution Date Statement shall be accompanied by an Officers'
Certificate of the Servicer, which Officers' Certificate shall state that the
computations reflected in such statement were made in conformity with the
requirements of this Agreement.
(b) On each Servicer Report Date, the Servicer shall render to the
Trustee and the Insurer a report, in respect of the immediately preceding
Collection Period, setting forth the following:
(i) the aggregate amount, if any, paid by or due from it for the
purchases of Contracts which the Seller or the Servicer has become
obligated to repurchase or purchase pursuant to Sections 2.3 or 3.7;
(ii) the net amount of funds which have been deposited in or
credited to the Collection Account or the Payahead Account in respect of
such Collection Period (including amounts, if any, collected during the
next preceding Collection Period and deposited in the Payahead Account
pursuant to Section 4.2) after giving effect to all permitted deductions
therefrom pursuant to Section 4.2;
(iii) with respect to each Contract that became a Liquidated
Contract during the Collection Period, the following information:
(A) its Contract Number;
(B) the effective date as of which such Contract became a
Liquidated Contract;
(C) its Monthly P&I and Scheduled Balance as of the close
of business on the last day of the preceding Collection Period
(or as of the Closing Date in the case of the first Distribution
Date); and
- 34 -
<PAGE> 41
(D) the amount of the Net Liquidation Proceeds or Net
Insurance Proceeds;
(iv) with respect to each Contract which was the subject of a
Full Prepayment during such Collection Period, the following
information:
(A) its Contract Number; and
(B) the date of such Full Prepayment;
(v) the Contract Numbers, Monthly P&I, Scheduled Balances and
Maturity Dates of all Contracts which became Defaulted Contracts during
such Collection Period;
(vi) any other information relating to the Contracts reasonably
requested by the Trustee or the Insurer; and
(vii) the amount of Net Liquidation Proceeds and Net Insurance
Proceeds which have been deposited in or credited to the Collection
Account in respect of the Collection Period ending immediately prior to
such Servicer Report Date and the cumulative amount of Net Liquidation
Proceeds and Net Insurance Proceeds deposited in or credited to the
Collection Account during the preceding Collection Periods.
SECTION 3.10 Annual Statement as to Compliance.
(a) The Servicer shall deliver to the Trustee and the Insurer, on or
before __________, 199_ and on or before _________ of each fiscal year
thereafter, an Officers' Certificate of the Servicer stating that (i) a review
of the activities of the Servicer during the preceding fiscal year (since the
Closing Date in the case of the first of such Officers' Certificates required to
be delivered) and of its performance under this Agreement has been made under
such officers' supervision and (ii) to the best of such officers' knowledge,
based on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such year and that no default under this Agreement has
occurred and is continuing, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default known to such officer and
the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Insurer and each
Rating Agency promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, an Officer's Certificate specifying
any event which with the giving of notice or lapse of time, or both, would
become an Event of Default under Section 8.1.
SECTION 3.11 Annual Independent Certified Public Accountant's Report.
On or before ________, 199_ and on or before _________ of each fiscal
year thereafter, the Servicer at its expense shall cause a firm of
nationally-recognized independent certified public accountants (who may also
render other services to the Servicer) to furnish a report to the Trustee and
the Insurer to the effect that (i) they have audited the balance sheet of the
Servicer as of the last day of said fiscal year and the related statements of
operations, retained earnings and cash flows for
- 35 -
<PAGE> 42
such fiscal year and have issued an opinion thereon, specifying the date
thereof, (ii) they have also audited the reports delivered by the Servicer
pursuant to Section 3.9(b) and certain other documents and the records relating
to the servicing of the Contracts and the distributions on the Certificates
under this Agreement, (iii) their audit as described under clauses (i) and (ii)
above was made in accordance with generally accepted auditing standards and
accordingly included such tests of the accounting records and such other
auditing procedures as they considered necessary in the circumstances, and (iv)
their audits described under clauses (i) and (ii) above disclosed no exceptions
which, in their opinion, were material, relating to the servicing of such
Contracts in accordance with this Agreement and the making of distributions on
the Certificates in accordance with this Agreement, or, if any such exceptions
were disclosed thereby, setting forth those exceptions which, in their opinion,
were material.
SECTION 3.12 Access to Certain Documentation and Information Regarding
Contracts.
If the Servicer is acting as Custodian, the Servicer shall provide to
the Certificateholders, the Trustee and the Insurer reasonable access to the
Contract Files. Access shall be afforded without charge, but only upon
reasonable request and during normal business hours at designated offices of the
Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors, and the failure of the Servicer to provide access to information as a
result of such obligation shall not constitute a breach of this Section 3.12.
SECTION 3.13 Fidelity Bond.
The Servicer shall maintain a fidelity bond in such form and amount as
is customary for banks acting as custodian of funds and documents in respect of
mortgage loans or consumer contracts on behalf of institutional investors.
SECTION 3.14 Indemnification; Third Party Claims.
The Servicer agrees to indemnify and hold the Trust, the Trustee and its
officers, directors, agents and employees, and the Certificateholders harmless
against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments, and any reasonable other costs, fees
and expenses that the Trustee or the Certificateholders may sustain because of
the failure of the Servicer to perform its duties and service the Contracts in
compliance with the terms of this Agreement. The Servicer shall immediately
notify the Trustee if a claim is made by a third party with respect to the
Contracts, shall assume, with the consent of the Trustee, the defense of any
such claim and shall pay all expenses in connection therewith, including counsel
fees, and shall promptly pay, discharge and satisfy any judgment or decree which
may be entered with respect to such claim against it or the Trustee or the
Certificateholders.
SECTION 3.15 Reports to Certificateholders and the Rating Agencies.
(a) The Trustee at its own expense shall provide to each
Certificateholder a copy of each Distribution Date Statement described in
Section 3.9(a) concurrently with the delivery of the statement described in
Section 4.5 below.
- 36 -
<PAGE> 43
(b) The Trustee shall provide to any Certificateholder who so requests
in writing (addressed to the Corporate Trust Office) a copy of the annual audit
statement described in Section 3.10, or the annual audit report described in
Section 3.11. The Trustee may require the Certificateholder to pay a reasonable
sum to cover the cost of the Trustee's complying with such request.
(c) The Trustee shall forward to the Rating Agencies and the Insurer the
statement to Certificateholders described in Section 4.5 and any other reports
it may receive pursuant to this Agreement to (i) Standard & Poor's Ratings
Services, Asset-Backed Surveillance Group, 26 Broadway, Fifteenth Floor, New
York, New York 10004, (ii) Moody's Investors Service, Inc., ABS Monitoring
Dept., 99 Church Street, 4th Floor, New York, New York 10007, and (iii) the
address of the Insurer at the address set forth in the Insurance Agreement.
ARTICLE IV
Accounts; Distributions; Statements to Certificateholders
SECTION 4.1 Accounts.
(a) Prior to the Closing Date, the Servicer shall open, at a depository
institution (which may be the Trustee), the following accounts for the benefit
of the Certificateholders: (i) an account denominated "Collection Account--GT
199_-_, ____________, Trustee" (the "Collection Account") and (ii) an account
denominated "Payahead Account--GT 199_-_, _____________, as agent" (the
"Payahead Account") and, collectively, with the Collection Account, the
"Accounts"). The Accounts shall be Eligible Accounts. The location and account
numbers of the Accounts as of the Closing Date are set forth on Schedule II. The
Servicer shall give the Trustee and the Insurer at least five Business Days'
written notice of any change in the location of any Account and any related
account identification information. All moneys deposited in or credited to, from
time to time, the Collection Account shall be part of the Trust and all moneys
deposited in or credited to, from time to time, the Collection Account shall be
invested by the Trustee, or on behalf of the Trustee by the depository
institution maintaining such account, in Eligible Investments pursuant to
Section 4.1(c).
(b) If as of the last day of a Collection Period a payment in an amount
less than the scheduled payment of Monthly P&I has been made for a Rule of 78's
Contract with respect to which amounts have been deposited in or credited to the
Payahead Account in a preceding Collection Period in accordance with Sections
3.1 and 4.2(a), the Servicer shall withdraw from the Payahead Account and
deposit into the Collection Account by the fifth Business Day preceding the
Distribution Date immediately succeeding such Collection Period the amount equal
to the difference between such scheduled payment of Monthly P&I and such actual
payment, to the extent available from amounts deposited in or credited to the
Payahead Account with respect to such Contract. Amounts on deposit in the
Payahead Account shall be invested by the depository institution maintaining the
Payahead Account upon the written direction of the Servicer in Eligible
Investments which mature not later than the fifth Business Day prior to the
Distribution Date to which such amounts relate, and any earnings on such
Eligible Investments shall be payable to the Servicer
- 37 -
<PAGE> 44
monthly. The Payahead Account and all amounts on deposit therein or credited
thereto shall not be considered part of the Trust Estate.
(c) All funds in the Collection Account shall be invested by the
Trustee, or on behalf of the Trustee by the depository institution maintaining
such account, in Eligible Investments. The Insurer shall direct the Trustee in
writing to invest funds, or cause the depository institution maintaining the
Collection Account in the Trustee's name to invest funds, in the Collection
Account in Eligible Investments; provided that in the absence of such directions
from the Insurer, the Servicer may so direct the Trustee. All such investments
shall be in the name of the Trustee as trustee of the Trust. All income or other
gain from investment of monies deposited in or credited to the Collection
Account shall be paid by the Trustee to the Servicer monthly, unless earlier
requested by the Servicer. The maximum permissible maturities of any such
investments pursuant to this Section 4.1(c) on any date shall not be later than
the Servicer Report Date preceding the Distribution Date next succeeding the
date of such investment; provided, however, that such funds may be invested by
the Trustee in Eligible Investments of the entity that is serving as Trustee (or
an entity which meets the criteria in clauses (i)(b) or (i)(c) of the definition
of Eligible Account) that mature on the Business Day prior to such Distribution
Date. No such investment may be sold prior to its maturity.
SECTION 4.2 Collections; Transfer to Payahead Account; Realization
Upon Financial Guarantee Insurance Policy; Net Deposit.
(a) Subject to Section 4.4 below, the Servicer shall remit or credit all
payments on a daily basis, within two Business Days of receipt, by or on behalf
of the Obligors on the Contracts and all Net Liquidation Proceeds and Net
Insurance Proceeds to the Collection Account. Prior to the Servicer Report Date,
amounts with respect to Rule of 78's Contracts which had been deposited in or
credited to the Collection Account pursuant to the next preceding sentence
during the preceding Collection Period shall be deposited in or credited to the
Payahead Account (in accordance with the Distribution Date Statement) to the
extent that such amounts are installments of Monthly P&I which are due in a
Collection Period relating to a Distribution Date subsequent to the Distribution
Date immediately succeeding such Collection Period.
(b) Based upon the report referenced in Section 3.9(b) delivered by the
Servicer to the Trustee on the Servicer Report Date, the Servicer shall
determine the Collection Account Amount Available, compare such amount to the
amounts required to be distributed pursuant to Section 4.3, and determine the
Policy Claim Amount, if any, which exists with respect to the related
Distribution Date.
(c) The Trustee shall, no later than 12:00 p.m. New York time on the
third Business Day prior to each Distribution Date, make a claim under the
Financial Guarantee Insurance Policy for the Policy Claim Amount, if any, for
such Distribution Date by delivering to the Fiscal Agent and the Bank, with a
copy to the Insurer, the Spread Account Trustee and the Servicer, by hand
delivery, telex or facsimile transmission, a Deficiency Notice specifying the
Policy Claim Amount. In making any such claim, the Trustee shall comply with all
the terms and conditions of the Financial Guarantee Insurance Policy. The
Trustee hereby agrees on behalf of each Certificateholder, and each
Certificateholder, by its acceptance of its Certificates, hereby agrees for the
benefit of the Insurer that
- 38 -
<PAGE> 45
the Trustee shall recognize that to the extent the Insurer makes a payment under
the Financial Guarantee Insurance Policy, either directly or indirectly (as by
paying though the Trustee) to the Certificateholders, the Insurer will be
entitled to be subrogated to the rights of the Certificateholders to the extent
of such payments
(d) So long as Onyx is the Servicer, the Servicer may make deposits in
or credits to the Collection Account net of amounts to be paid to the Servicer
under this Agreement. Notwithstanding the foregoing, the Servicer shall maintain
the records and accounts for such deposits and credits on a gross basis.
SECTION 4.3 Distributions.
(a) On the Business Day immediately preceding each Distribution Date,
the Trustee shall transfer, or cause to be transferred, to the Paying Agent for
deposit in the Distribution Account from the Amount Available in the Collection
Account, the amounts set forth in clauses (ii) and (iii) below, to the extent
that such amounts are available after giving effect to the amount to be
distributed on the Distribution Date set forth in clause (i).
On each Distribution Date, the following amounts shall be distributed
from the Amount Available in the following order of priority in accordance with
the Distribution Date Statement:
(i) by the Trustee from the Collection Account to the Servicer,
the Servicing Fee payable on such Distribution Date pursuant to Section
3.8, to the extent of the Amount Available and to the extent not
retained by the Servicer pursuant to Section 4.2(d);
(ii) by the Paying Agent from the Distribution Account, to the
Certificateholders, the Interest Distribution with respect to such
Distribution Date to the extent of the Amount Available remaining after
the distribution made pursuant to clause (i) above;
(iii) by the Paying Agent from the Distribution Account, to the
Certificateholders, the Principal Distribution with respect to such
Distribution Date to the extent of the Amount Available remaining after
the distributions made pursuant to clauses (i) and (ii) above; and
(iv) by the Trustee from the Collection Account, to the Insurer,
the Premium with respect to such Distribution Date to the extent of the
Amount Available remaining after the distributions made pursuant to
clauses (i), (ii) and (iii) above.
Any amounts remaining in the Collection Account after giving effect to
the distributions set forth in items (i) through (iv) above shall be deposited
in the Spread Account and shall be held or distributed in accordance with the
provisions of the Insurance Agreement.
All distributions to Certificateholders shall be made pro rata by check
mailed to each Certificateholder of record on the Record Date next preceding the
Distribution Date for such distribution; provided, that if so directed by the
Servicer in the case of Certificates registered in the name of a Clearing
Agency, such distribution shall be made by wire transfer in immediately
available funds.
- 39 -
<PAGE> 46
SECTION 4.4 Remittance Of Repurchase Amount.
The Servicer and the Seller, as the case may be, each shall remit or
credit to the Collection Account each Repurchase Amount to be remitted by it
with respect to Repurchased Contracts on the Business Day preceding the Servicer
Report Date next succeeding (i) the end of the Collection Period in which the
applicable Contract is repurchased by the Seller pursuant to Section 2.3, in the
case of the Seller or (ii) the last day of the related cure period specified in
Section 3.7, in the case of the Servicer.
SECTION 4.5 Statements to Certificateholders.
On each Distribution Date, the Trustee shall include with each
distribution to each Certificateholder a statement, based on information set
forth in the Distribution Date Statement furnished pursuant to Section 3.9,
setting forth for such Distribution Date the following information:
(a) the amount of such Certificateholder's distribution allocable to
principal, separately identifying the aggregate amount included therein of any
(i) Full Prepayments of principal on Rule of 78's Contracts, and (ii) Full
Prepayments and partial prepayments of principal on Simple Interest Contracts;
(b) the amount of such Certificateholder's distribution allocable to
interest;
(c) the Certificateholder's pro rata portion of expenses allocable to
the Servicing Fee paid to the Servicer and the Premium paid to the Insurer; and
(d) the Pool Balance and the Pool Factor as of the Distribution Date
(after giving effect to the distribution made on such Distribution Date).
In the case of the information furnished pursuant to clauses (a), (b)
and (c) above, the amounts shall be expressed as a dollar amount per Certificate
evidencing a $1,000 denomination.
Within a reasonable period of time after the end of each calendar year
but not later than the latest date permitted by law, the Servicer shall prepare
and furnish to the Trustee and the Paying Agent and the Paying Agent shall
furnish, to each Person who on any Record Date during such calendar year shall
have been a Certificateholder, a statement containing the sum of the amounts
determined in clauses (a) through (c) and such other information as is
reasonably necessary for the preparation of such Person's federal income tax
return in respect of the Certificates, for such calendar year or, in the event
such Person shall have been a Certificateholder during a portion of such
calendar year, for the applicable portion of such year, for the purposes of such
Certificateholder's preparation of federal income tax returns.
- 40 -
<PAGE> 47
ARTICLE V
The Certificates
SECTION 5.1 The Certificates.
Unless otherwise specified in this Agreement, the Certificates shall be
substantially in the form set forth in Exhibit B and shall be issued in
denominations of $1,000 and integral multiples thereof; provided, however, that
one Certificate may be issued in a denomination that includes any residual
portion of the Original Pool Balance. The Certificates shall be executed on
behalf of the Trust by manual or facsimile signature of a Responsible Officer of
the Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of the issuance of
such Certificates. No Certificate shall entitle its holder to any benefit under
this Agreement, or shall be valid for any purpose, unless there shall appear on
such Certificate a certificate of authentication substantially in the form set
forth in Exhibit B hereto executed by the Trustee by manual signature; such
authentication shall constitute conclusive evidence that such Certificate shall
have been duly authenticated and delivered hereunder. All Certificates shall be
dated the date of their authentication. Upon issuance pursuant to the terms of
this Agreement, the Certificates will be entitled to the benefits of this
Agreement.
SECTION 5.2 Execution, Authentication and Delivery of Certificates.
In exchange for the Contracts and the other assets of the Trust as of
the Closing Date, simultaneously with the sale, assignment and transfer to the
Trustee of the Contracts, the delivery to the Trustee of the Contract Documents,
the constructive delivery to the Trust of the Contract Files other than the
Contract Documents and the delivery to the Trustee of the other components of
the Trust, the Trustee shall deliver to, or upon the written order of, the
Seller, Certificates duly executed by the Trustee, on behalf of the Trust, and
authenticated by the Trustee in authorized denominations equaling in the
aggregate the Original Pool Balance, and evidencing the entire ownership of the
Trust.
SECTION 5.3 Registration of Transfer and Exchange of Certificates.
The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and certificate registrar (the "Transfer Agent"
and "Certificate Registrar") and maintain, pursuant to Section 5.7, a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Trustee shall be
the initial Transfer Agent and Certificate Registrar.
Subject to the other provisions of this Section, upon surrender for
registration or transfer of any Certificate at the Corporate Trust Office, the
Trustee shall execute on behalf of the Trust, authenticate and deliver, in the
name of the designated transferee or transferees, one or more new
- 41 -
<PAGE> 48
Certificates in authorized denominations of a like aggregate amount. At the
option of a Certificateholder, Certificates may be exchanged for other
Certificates of authorized denominations of a like aggregate amount at the
Corporate Trust Office.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
Holder. Each Certificate surrendered for registration of transfer and exchange
shall be canceled and subsequently destroyed by the Trustee.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 5.4 Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss, or theft of any Certificate and (ii)
there shall be delivered to the Certificate Registrar or the Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, the Trustee on behalf of the Trust shall execute and the
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section 5.4, the Trustee and the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section 5.4 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen, or
destroyed Certificate shall be found at any time.
SECTION 5.5 Persons Deemed Owners.
Prior to due presentation of a Certificate for registration or transfer,
the Trustee or the Certificate Registrar may treat the Person in whose name any
Certificate shall be registered as the owner of such Certificate for the purpose
of receiving distributions pursuant to Section 4.3 and for all other purposes
whatsoever, and neither the Trustee nor the Certificate Registrar shall be bound
by any notice to the contrary.
SECTION 5.6 Access to List of Certificateholders' Names and Addresses.
The Trustee shall furnish or cause to be furnished to the Servicer,
within 15 days after receipt by the Trustee of a request therefor from the
Servicer in writing, a list of the names and addresses of the Certificateholders
as of the most recent Record Date. If three or more Certificateholders, or one
or more Holders of Certificates evidencing in the aggregate not less than 25% of
the Pool Balance (hereinafter referred to as "applicants"), apply in writing to
the Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application shall be
accompanied by a copy of the communication that such applicants propose to
transmit, then the Trustee shall, within
- 42 -
<PAGE> 49
five Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Each Certificateholder, by receiving and holding a Certificate, shall be deemed
to have agreed to hold neither the Servicer nor the Trustee accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 5.7 Maintenance of Office or Agency.
The Trustee shall maintain in the Borough of Manhattan, the City of New
York, an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee in respect of the Certificates and this Agreement
may be served. The Trustee initially designated the Corporate Trust Office as
specified in this Agreement as its office for such purposes. The Trustee shall
give prompt written notice to the Servicer and to Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
SECTION 5.8 Book-Entry Certificates.
The Certificates (other than a Certificate representing any residual
portion of the Original Pool Balance), upon original issuance, shall be issued
in the form of typewritten Certificates representing the Book-Entry
Certificates, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by the Seller or on its behalf. The Certificates shall
initially be registered on the Certificate Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in the Certificates, except as provided in Section 5.10. Unless and until
definitive, fully registered Certificates ("Definitive Certificates") have been
issued to Certificateholders pursuant to Section 5.10:
(i) the provisions of this Section 5.8 shall be in full force
and effect;
(ii) the Seller, the Servicer, the Paying Agent, the Transfer
Agent and Certificate Registrar and the Trustee may deal exclusively
with the Clearing Agency for all purposes (including the making of
distributions in respect of the Certificates and the taking of actions
by the Certificateholders) as the authorized representative of the
Clearing Agency Participants and the Certificate Owners;
(iii) to the extent that the provisions of this Section 5.8
conflict with any other provisions of this Agreement, the provisions of
this Section 5.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency (or to the extent Certificate Owners are not
Clearing Agency Participants through the Clearing Agency Participants
through which such Certificate Owners own Book-Entry Certificates) and
shall be limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency and/or the Clearing Agency
Participants and all references in this Agreement to actions by
Certificateholders shall refer to actions taken by the Clearing Agency
upon instructions from the Clearing Agency Participants, and all
- 43 -
<PAGE> 50
references in this Agreement to distributions, notices, reports and
statements to Certificateholders shall refer to distributions, notices,
reports and statements to the Clearing Agency or its nominee, as
registered holder of the Certificates, as the case may be, for
distribution to Certificate Owners in accordance with the procedures of
the Clearing Agency; and
(v) pursuant to the Depository Agreement, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the Certificates to the Clearing Agency Participants, for
distribution by such Clearing Agency Participants to the Certificate
Owners or their nominees.
The Clearing Agency Participants shall have no rights under this
Agreement under or with respect to any of the Certificates held on their behalf
by the Clearing Agency, and the Clearing Agency may be treated by the Trustee,
and its agents, employees, officers and directors, as the absolute owner of the
Certificates for all purposes whatsoever.
SECTION 5.9 Notices to Clearing Agency.
Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 5.10, the Trustee and
the Paying Agent shall give all such notices and communications specified herein
to be given by it to Certificateholders to the Clearing Agency.
SECTION 5.10 Definitive Certificates.
If (i)(A) the Seller advises the Trustee in writing that the Clearing
Agency is no longer willing or able to discharge properly its responsibilities
under the Depository Agreement, and (B) the Trustee and the Seller are unable to
locate a qualified successor or (ii) after the occurrence of an Event of
Default, Certificate Owners representing beneficial interests aggregating more
than 50% of the Pool Balance advise the Clearing Agency and the Trustee (and the
Clearing Agency shall notify the Trustee in writing thereof) through the
Clearing Agency Participants in writing that the continuation of a book-entry
system with respect to the Certificates through a depository is no longer in the
best interests of the Certificate Owners, the Trustee shall notify the Clearing
Agency of the occurrence of any event described in clauses (i) and (ii) above
and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Transfer Agent and Certificate
Registrar by the Clearing Agency of Certificates registered in the name of such
Clearing Agency or its nominee, accompanied by re-registration instructions from
the Clearing Agency for registration of the Definitive Certificates, the Trustee
shall execute on behalf of the Trust, authenticate and (if the Transfer Agent
and Certificate Registrar is different than the Trustee, then the Transfer Agent
and Certificate Registrar shall) deliver Definitive Certificates. The Servicer
shall arrange for, and will bear all costs of, the printing and issuance of such
Definitive Certificates. None of the Seller, the Servicer, the Transfer Agent
and Certificate Registrar or the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on such instruction. Upon the issuance of Definitive
Certificates, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed
- 44 -
<PAGE> 51
upon and performed by the Transfer Agent and Certificate Registrar, to the
extent applicable with respect to such Definitive Certificates, and the Trustee,
the Paying Agent and the Transfer Agent and Certificate Registrar shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.
SECTION 5.11 Appointment of Paying Agent.
(a) The Paying Agent shall have the revocable power to withdraw funds
from the Distribution Account and make distributions to the Certificateholders.
The Trustee may revoke such power and remove the Paying Agent, if the Trustee
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect or for
other good cause. The Paying Agent shall initially be ___________.
________________shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Servicer and the Trustee. In the event that
_________________ shall no longer be the Paying Agent, the Trustee shall appoint
a successor to act as Paying Agent, which shall be a bank or trust company.
(b) The Trustee shall cause the Paying Agent (if other than itself) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders or any other party entitled
thereto, and the Trustee in trust for the benefit of the Certificateholders or
such other party until such sums shall be paid to such Certificateholders or
such other party and shall agree that it shall comply with all requirements of
the Code regarding the withholding of payments in respect of federal income
taxes due from Certificate Owners.
(c) _________________ in its capacity as initial Paying Agent hereunder
agrees that it (i) will hold all sums held by it hereunder for payment to the
Certificateholders or any other party entitled thereto, in trust for the benefit
of the Certificateholders or such other party until such sums shall be paid to
such Certificateholders or such other party and (ii) shall comply with all
requirements of the Code regarding the withholding of payments in respect of
federal income taxes due from Certificate Owners.
SECTION 5.12 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents (each an
"Authenticating Agent") with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Whenever reference is made in this Agreement to
the authentication of Certificates by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent. Any
authenticating agent appointed by the Trustee shall require the consent of the
Seller, which consent may not be unreasonably withheld.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
- 45 -
<PAGE> 52
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and the Seller. The Trustee may at any time
terminate the agency of an authenticating agent by giving notice of termination
to such authenticating agent and to the Seller. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time an authenticating
agent shall cease to be acceptable to the Trustee or the Seller, the Trustee
promptly may appoint a successor authenticating agent with the consent of the
Seller. Any successor authenticating agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
authenticating agent. Any successor authenticating agent appointed by the
Trustee shall require the consent of the Seller, which consent may not be
unreasonably withheld.
(d) The Servicer shall pay the Authenticating Agent from time to time
reasonable compensation for its services under this Section 5.12.
(e) Pursuant to an appointment made under this Section 5.12, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the certificates referred to in the within mentioned
Agreement.
________________________,
as Trustee
By:______________________
Authorized Signatory
or
__________________________
as Authenticating Agent
for the Trustee,
By:______________________
Authorized Signatory
SECTION 5.13 Actions of Certificateholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such
Certificateholders in person or by an agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee on
behalf of the Trust and, when required, to the Seller or the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any
- 46 -
<PAGE> 53
purpose of this Agreement and conclusive in favor of the Trustee, the Seller and
the Servicer, if made in the manner provided in this Section 5.13.
ARTICLE VI
The Seller
SECTION 6.1 Liability of Seller; Indemnities.
The Seller shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by the Seller under this Agreement.
The Seller shall indemnify, defend, and hold harmless the Trustee and
its officers, directors, agents and employees and the Trust from and against any
taxes that may at any time be asserted against the Trustee or the Trust with
respect to, and as of the date of, the sale of the Contracts to the Trustee or
the issuance and original sale of the Certificates, including any sales, gross
receipts, general corporation, tangible personal property, privilege, or license
taxes (but not, in case of the Trust, including any taxes asserted with respect
to ownership of the Contracts or federal or other income taxes arising out of
the transactions contemplated by this Agreement) and costs and expenses in
defending against the same.
The Seller shall indemnify, defend, and hold harmless the Trustee and
its officers, directors, agents and employees from and against any loss,
liability or expense incurred by reason of the Seller's willful misfeasance, bad
faith, or negligence in the performance of its duties hereunder, or by reason of
reckless disregard of its obligations and duties hereunder.
The Seller shall indemnify, defend and hold harmless the Trustee and its
officers, directors, agents and employees and the Trust from and against all
costs, expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties herein contained, except to the extent that such cost, expense, loss,
claim, damage or liability: (i) shall be due to the willful misfeasance, bad
faith, or gross negligence of the Trustee; (ii) relates to any tax other than
the taxes with respect to which the Seller shall be required to indemnify the
Trustee; (iii) shall arise from the Trustee's breach of any of its
representations or warranties set forth in Section 9.14; or (iv) shall be one as
to which the Servicer is required to indemnify the Trustee.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
recipient thereafter shall collect any of such amounts from others, the
recipient shall promptly repay such amounts to the Seller, without interest.
- 47 -
<PAGE> 54
SECTION 6.2 Merger or Consolidation of, or Assumption of the
Obligations of, Seller.
The Seller shall not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets as an
entirety to any Person unless the corporation formed by such consolidation or
into which the Seller has merged or the Person which acquires by conveyance,
transfer or lease substantially all the assets of the Seller as an entirety, can
lawfully perform the obligations of the Seller hereunder and executes and
delivers to the Insurer and the Trustee an agreement in form and substance
reasonably satisfactory to the Trustee and the Insurer, which contains an
assumption by such successor entity of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Seller under this Agreement.
SECTION 6.3 Limitation on Liability of Seller and Others.
The Seller and any director or officer or employee or agent of the
Seller may rely in good faith on any document of any kind, prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Seller shall not be under any obligation to appear in, prosecute, or defend
any legal action that shall not be incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or liability.
SECTION 6.4 Seller Not to Resign.
Subject to the provisions of Section 6.2, the Seller shall not resign
from the obligations and duties hereby imposed on it as Seller under this
Agreement.
SECTION 6.5 Seller May Own Certificates.
The Seller and any Person controlling, controlled by, or under common
control with the Seller may in its individual or any other capacity become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an affiliate thereof, except as otherwise provided in the
definition of "Certificateholder" specified in Section 1.1. Certificates so
owned by or pledged to the Seller or such controlling or commonly controlled
Person shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority, or distinction as among all of the
Certificates.
ARTICLE VII
The Servicer
SECTION 7.1 Liability of Servicer; Indemnities.
The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Servicer under this Agreement.
Such obligations shall include the following:
- 48 -
<PAGE> 55
(a) the Servicer shall defend, indemnify, and hold harmless the Trustee
and its officers, directors, agents and employees, the Trust, the Insurer and
the Certificateholders from and against any and all costs, expenses, losses,
damages, claims, and liabilities, arising out of or resulting from the use or
operation by the Servicer or any Affiliate thereof of a Financed Vehicle;
(b) the Servicer shall indemnify, defend and hold harmless the Trustee
and its officers, directors, agents and employees, the Insurer and the Trust
from and against any taxes that may at any time be asserted against the Trustee
or the Trust with respect to the transactions contemplated herein, including,
without limitation, any sales, gross receipts, general corporation, tangible
personal property, privilege, or license taxes (but not including any taxes
asserted with respect to, and as of the date of, the sale of the Contracts to
the Trustee or the issuance and original sale of the Certificates, or asserted
with respect to ownership of the Contracts, or federal or other income taxes
arising out of distributions on the Certificates) and costs and expenses in
defending against the same;
(c) the Servicer shall indemnify, defend and hold harmless the Trustee
and its officers, directors, agents and employees, the Trust, the Insurer and
the Certificateholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon the Trustee, the
Trust, or the Certificateholders through, the negligence, willful misfeasance,
or bad faith of the Servicer in the performance of its duties under this
Agreement; and
(d) the Servicer shall indemnify, defend, and hold harmless the Trustee
and the Insurer from and against all costs, expenses, losses, claims, damages,
and liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties herein contained, except to the extent that
such cost, expense, loss, claim, damage, or liability: (i) shall be due to the
willful misfeasance, bad faith, or gross negligence of the Trustee or the
Insurer; (ii) relates to any tax other than the taxes with respect to which the
Servicer shall be required to indemnify the Trustee; (iii) shall arise from the
Trustee's breach of any of its representations or warranties set forth in
Section 9.14; or (iv) shall be one as to which the Seller is required to
indemnify the Trustee.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts to the Servicer, without interest.
SECTION 7.2 Corporate Existence; Status as Servicer; Merger.
(a) The Servicer shall keep in full effect its existence, rights and
franchises as a corporation incorporated under the laws of the State of
Delaware, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Contract
Documents and this Agreement.
(b) The Servicer shall not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets as an
entirety to any Person or engage in any corporate transaction pursuant to which
the surviving or successor entity is not Onyx Acceptance Corporation,
- 49 -
<PAGE> 56
unless (i) such entity is at least rated investment grade by the
Rating Agencies, (ii) the Insurer shall have consented thereto in writing and
(iii) such entity executes and delivers to the Trustee and the Insurer an
agreement in form and substance reasonably satisfactory to the Trustee and the
Insurer, which contains an assumption by such successor entity of the due and
punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under this Agreement.
SECTION 7.3 Performance of Obligations.
(a) The Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(b) The Servicer shall not take any action, or permit any action to be
taken by others, which would excuse any person from any of its covenants or
obligations under any of the Contract Documents or under any other instrument
included in the Trust Estate, or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any of the Contract Documents or any such
instrument, except as expressly provided herein and therein.
SECTION 7.4 The Servicer Not to Resign; Assignment.
(a) The Servicer shall not resign from the duties and obligations hereby
imposed on it except upon determination by its Board of Directors that by reason
of change in applicable legal requirements the continued performance by the
Servicer of its duties under this Agreement would cause it to be in violation of
such legal requirements in a manner which would result in a material adverse
effect on the Servicer or its financial condition, said determination to be
evidenced by a resolution of its Board of Directors to such effect accompanied
by an Opinion of Counsel, satisfactory to the Trustee, to such effect. No such
resignation shall become effective unless and until (i) the Trustee assumes all
of the Servicer's obligations under this Agreement or (ii) a new servicer
acceptable to the Trustee and the Insurer is willing to service the Contracts,
enters into a servicing agreement with the Trustee in form and substance
substantially similar to this Agreement and satisfactory to the Trustee and the
Insurer, and each Rating Agency confirms that the selection of such new servicer
will not result in the reduction or withdrawal of the rating of the Certificates
assigned to them by such Rating Agency. No such resignation by the Servicer
shall affect the obligation of the Servicer to repurchase any Contract pursuant
to Section 3.7.
(b) Except as specifically permitted hereunder, the Servicer may not
assign this Agreement or any of its rights, powers, duties or obligations
hereunder, provided that the Servicer may assign this Agreement in connection
with a consolidation, merger, conveyance, transfer or lease made in compliance
with Section 7.2(b).
(c) Except as provided in Sections 7.4(a) and (b), the duties and
obligations of the Servicer under this Agreement shall continue until this
Agreement shall have been terminated as provided in Section 10.1, and shall
survive the exercise by the Trustee or the Insurer of any right or remedy under
this Agreement, or the enforcement by the Trustee, any Certificateholder or the
Insurer of any provision of the Certificates, the Insurance Agreement or this
Agreement.
- 50 -
<PAGE> 57
(d) The resignation of the Servicer in accordance with this Section 7.4
shall not affect the rights of the Seller hereunder.
SECTION 7.5 Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees
or agents of the Servicer shall be under any liability to the Trust or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this Agreement
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer or any such person against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
(except errors in judgment) in the performance of duties or by reason of
reckless disregard of obligations and duties under this Agreement. The Servicer
and any director or officer or employee or agent of the Servicer may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute, or defend any legal action that shall
not be incidental to its duties to service the Contracts in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the rights and
duties of the parties to this Agreement and the interests of the
Certificateholders under this Agreement.
ARTICLE VIII
Default
SECTION 8.1 Events of Default.
If any one of the following events ("Events of Default") shall occur and
be continuing:
(a) any failure by the Servicer to deposit in or credit to the
Collection Account or the Payahead Account any amount required under this
Agreement to be so deposited or credited that shall continue unremedied for a
period of three Business Days after written notice from the Trustee or the
Insurer is received by the Servicer or discovery by an officer of the Servicer;
or
(b) the Insurer or the Trustee shall not have received a report in
accordance with Section 3.9 by the Servicer Report Date with respect to which
such report is due; or
(c) failure on the part of the Seller or the Servicer duly to observe or
to perform in any material respect any other covenants or agreements of the
Seller or the Servicer set forth in this Agreement, which failure shall (x)
materially and adversely affect the rights of Certificateholders, the Insurer or
the Trustee and (y) continue unremedied for a period of 30 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given (i) to the Seller or the Servicer, as the case may be, by
the Trustee or the Insurer, or (ii) to the Seller or the
- 51 -
<PAGE> 58
Servicer, as the case may be, and to the Trustee by the Holders of Certificates
evidencing in the aggregate not less than 25% of the Pool Balance; or
(d) the entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer or the Seller in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal or state, bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or the Seller
or of any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Servicer or the Seller and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days or the commencement of an involuntary case under the federal bankruptcy
laws, as now or hereinafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law and such case is not dismissed
within 60 days; or
(e) the commencement by the Servicer or the Seller of a voluntary case
under the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future, federal or state, bankruptcy, insolvency or similar law, or
the consent by the Servicer to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or the Seller or of any substantial part of its
property or the making by the Servicer of an assignment for the benefit of
creditors or the failure by the Servicer or the Seller generally to pay its
debts as such debts become due or the taking of corporate action by the Servicer
or the Seller in furtherance of any of the foregoing; or
(f) any change of control of the Servicer in violation of the covenant
set forth in Section 7.2 hereof; or
(g) the Servicer shall have failed in the reasonable opinion of the
Insurer to service the Contracts in accordance with the Servicing Standards and
such failure shall have continued unremedied for 30 days after written notice of
such failure shall have been delivered to the Servicer by the Insurer; or
(h) any representation, warranty or statement of the Servicer or the
Seller made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material respect as
of the time when the same shall have been made (excluding, however, any
representation or warranty to which Sections 2.2 or 3.6 shall be applicable so
long as the Servicer or the Seller shall be in compliance with Sections 2.3 or
3.7, as the case may be), and the incorrectness of such representation, warranty
or statement has a material adverse effect on the Trust or the Insurer and,
within 30 days after written notice thereof shall have been given to the
Servicer or the Seller by the Trustee or by the Holders of Certificates
evidencing in the aggregate at least 25% of the Pool Balance or by the Insurer,
the circumstance or condition in respect of which such representation, warranty
or statement was incorrect shall not have been eliminated or otherwise cured;
then and in each and every case, so long as an Event of Default shall not have
been remedied, either the Trustee, the Insurer or the Holders of Certificates
evidencing in the aggregate not less than 25% of the Pool Balance, by notice
then given in writing to the Servicer (and to the Trustee and the
- 52 -
<PAGE> 59
Insurer if given by the Certificateholders) may terminate all of the rights and
obligations of the Servicer under this Agreement. On or after the receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the Contracts or
otherwise, shall pass to and be vested in the Trustee or, if a successor
servicer has been appointed pursuant to Section 8.2, such successor servicer;
and, without limitation, the Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and assignment of the
Contracts and related documents, to show the Trustee as a lienholder or secured
party on Title Documents or financing statements, or otherwise. The Servicer
shall cooperate with the Trustee and the Insurer in effecting the termination of
the responsibilities and rights of the Servicer under this Agreement, including
the transfer to the Trustee for administration by it of all cash amounts that
(i) shall at the time be held by the Servicer for deposit in, or shall have been
deposited by the Servicer in, the Collection Account or Payahead Account or (ii)
shall thereafter be received with respect to a Contract.
SECTION 8.2 Trustee to Act; Appointment of Successor.
Upon the Servicer's receipt of notice of termination pursuant to Section
8.1, or upon resignation of the Servicer pursuant to Section 7.4, the Trustee
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement, and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions of this Agreement, except that the Trustee shall not be obligated to
purchase Contracts pursuant to Section 3.7. As compensation therefor, the
Trustee shall be entitled to such compensation (whether payable out of the
Collection Account or otherwise) as the Servicer would have been entitled to
under this Agreement if no such notice of termination shall have been given.
Notwithstanding the above, the Trustee may, if it shall be unwilling to act, or
shall, if it shall be legally unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, any established financial institution
acceptable to the Insurer, having a net worth or not less than $50,000,000 and
whose regular business shall include the servicing of automotive retail
installment sales contracts, as the successor to the Servicer under this
Agreement. Pending appointment of any such successor Servicer, the Trustee shall
act in such capacity as provided above. In connection with such appointment, the
Trustee may make such arrangements for the compensation of the successor out of
payments on Contracts as it and such successor shall agree; provided, however,
(i) that such amount shall equal the product of a fixed percentage rate and the
Scheduled Balance, as of the commencement of each Collection Period, of each
Contract and (ii) that no such compensation shall be in excess of that
previously permitted the Servicer under this Agreement. The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
SECTION 8.3 Notification to Certificateholders.
Upon any termination of, or appointment of a successor to, the Servicer
pursuant to this Article VIII, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.
- 53 -
<PAGE> 60
SECTION 8.4 Waiver of Past Defaults.
The Holders of Certificates evidencing not less than 51% of the Pool
Balance (not including Certificates held by the Seller, the Servicer or any of
their respective Affiliates), with the written consent of the Insurer, may, on
behalf of all Certificateholders, waive any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in the failure to make any required deposits to or payments from the Collection
Account in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
The Servicer shall give prompt written notice of any waiver to each Rating
Agency and the Trustee.
SECTION 8.5 Insurer Direction of Insolvency Proceedings.
The Trustee, upon the actual knowledge of a Responsible Officer of the
Trustee, shall promptly notify the Insurer of (i) the commencement of any of the
events or proceedings (individually, an "Insolvency Proceeding") described in
Sections 8.1(d) or 8.1(e) hereof or any such event or proceeding applicable to
an Obligor under a Contract and (ii) the making of any claim in connection with
any Insolvency Proceeding seeking the avoidance as a preferential transfer (a
"Preference Claim") of any payment of principal of, or interest on, any Contract
or any Certificate. Each Certificateholder, by its purchase of Certificates, and
the Trustee hereby agree that, so long as neither a default under the Financial
Guarantee Insurance Policy nor an Insurer Insolvency has occurred and is
continuing, the Insurer may at any time during the continuation of an Insolvency
Proceeding direct all matters relating to such Insolvency Proceeding, including,
without limitation, (i) all matters relating to any Preference Claim, (ii) the
direction of any appeal of any order relating to any Preference Claim and (iii)
the posting of any surety or performance bond pending any such appeal. The
Insurer shall be subrogated to the rights of the Trustee and each
Certificateholder in the conduct of any Insolvency Proceeding, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Insolvency
Proceeding.
ARTICLE IX
The Trustee
SECTION 9.1 No Power to Engage in Business or to Vary Investments.
Notwithstanding any provision or agreement to the contrary in this
Agreement or in any other agreement, the Trustee, acting on behalf of the Trust
(but not individually), shall not have any power to engage in any business,
commercial or other activity for profit, and, subject to Section 3.2, the
Trustee and the Servicer shall not have any power to vary the Trust Estate,
whether consisting of a Contract, an Eligible Investment or any other amount
(other than cash payments received with respect to Contracts) in any account
maintained for the benefit of the Trust or the Certificateholders or Certificate
Owners, by disposition of said property, investment or amount and the
reinvestment of the proceeds realized or by any other action calculated to take
advantage of any variation or
- 54 -
<PAGE> 61
change in the market or in market conditions, for the purpose of improving the
investment or return of the Certificateholders or Certificate Owners.
SECTION 9.2 Duties of Trustee.
The Trustee, both prior to and after the occurrence of an Event of
Default, of which a Responsible Officer of the Trustee has actual knowledge,
shall undertake to perform such duties and only such duties as are specifically
set forth in this Agreement. If an Event of Default shall have occurred and
shall not have been cured, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and shall use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstance in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that shall be specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they comply
as to form to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act
(other than errors in judgment), or its own willful misconduct; provided,
however, that:
(a) prior to the occurrence of an Event of Default, and after the curing
of all such Events of Default that may have occurred, the duties and obligations
of the Trustee shall be terminated solely by the express provisions of this
Agreement, the Trustee shall not be liable except for the performance of such
duties and obligations as shall be specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely on the truth of the statements and the correctness of the
opinions expressed upon any certificates or opinions furnished to the Trustee
and conforming to the requirements of this Agreement;
(b) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee shall have been negligent in
performing its duties in accordance with the terms of this Agreement; and
(c) the Trustee shall not be liable with respect to any action taken,
suffered, or omitted to be taken by it in good faith in accordance with the
written direction of the Insurer or Holders of Certificates evidencing in the
aggregate not less than 25% of the Pool Balance relating to the time, method,
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Agreement.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall be
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be
- 55 -
<PAGE> 62
responsible for the manner of performance of, any of the obligations of the
Servicer under this Agreement unless the Trustee is then acting as Servicer.
The Trustee shall not be charged with knowledge of an Event of Default
or a failure by the Servicer to comply with any of its obligations unless and
until such time as a Responsible Officer shall have actual knowledge or have
received written notice thereof from the Servicer, the Insurer or the Holders of
Certificates evidencing in the aggregate not less than 10% of the Pool Balance.
In the event the Trustee hereunder is also acting as successor Servicer,
the rights and protections afforded to the Trustee pursuant to this Article IX
shall also be afforded to such successor Servicer.
Except for actions expressly authorized by this Agreement or, based upon
an Opinion of Counsel, in the best interests of Certificateholders, the Trustee
shall take no action reasonably likely to impair the security interest of the
Trust in any Contract or to impair the value of any Contract.
The Trustee shall not be liable for the selection of Eligible
Investments or for any investment losses resulting from Eligible Investments,
nor shall the Trustee be liable for the actions or omissions of any depository
institution maintaining the Accounts.
The Trustee shall have no duty to monitor the performance of the
Servicer, nor shall it have any liability in connection with the malfeasance or
nonfeasance by the Servicer. The Trustee shall have no liability in connection
with compliance of the Servicer or the Seller with statutory or regulatory
requirements related to the Contracts. The Trustee shall not make or be deemed
to have made any representations or warranties with respect to the Contracts or
the validity or sufficiency of any assignment of the Contracts to the Trust or
the Trustee.
All information obtained by the Trustee regarding the Obligors and the
Contracts, whether upon the exercise of its rights under this Agreement or
otherwise, shall be maintained by the Trustee in confidence, provided, however,
that the foregoing shall not be construed to prohibit (i) disclosure of any and
all information that is or becomes publicly known, or information obtained by
the Trustee from sources other than the Seller, Insurer, any Obligor or the
Servicer, (ii) disclosure of any and all information (A) if required to do so by
any applicable statute, law, rule or regulation, (B) to any government agency or
regulatory or self-regulatory body having or claiming authority to regulate or
oversee any aspects of the Trustee's business or that of its Affiliates, (C)
pursuant to any subpoena, civil investigative demand or similar demand or
request of any court, regulatory authority, arbitrator or arbitration to which
the Trustee or an Affiliate or an officer, director, employer or shareholder
thereof is a party, (D) in any preliminary or final offering circular,
registration statement or contract or other document pertaining to the
transactions contemplated by this Agreement approved in advance by the Seller or
(E) to any Affiliate, independent or internal auditor, agent, employee or
attorney of the Trustee having a need to know the same, provided that the
Trustee advises such recipient of the confidential nature of the information
being disclosed, (iii) any other disclosure authorized by the Seller or the
Servicer or (iv) disclosure to the other parties to the transactions
contemplated by this Agreement.
- 56 -
<PAGE> 63
In the event that the Paying Agent or the Transfer Agent and Certificate
Registrar shall fail to perform any obligation, duty or agreement in the manner
or on the day required to be performed by the Paying Agent or the Transfer Agent
and Certificate Registrar, as the case may be, under this Agreement, the Trustee
shall be obligated promptly upon a Responsible Officer obtaining actual
knowledge thereof to perform such obligation, duty or agreement in the manner so
required to the extent the information necessary to such performance is
reasonably available to the Trustee after the Trustee has made a reasonable
effort to obtain such information. The Trustee shall not be liable for the acts
or omissions of any Paying Agent, any Authenticating Agent or the Transfer Agent
and Certificate Registrar appointed hereunder with due care by the Trustee
hereunder.
SECTION 9.3 Trustee's Assignment of Purchased Contracts.
With respect to all Contracts repurchased by the Seller pursuant to
Section 2.3 or purchased by the Servicer pursuant to Sections 3.7 or 10.2, the
Trustee on behalf of the Trust shall assign, without recourse, representation,
or warranty to the Seller or the Servicer, as the case may be, all the Trust's
right, title, and interest in and to such Contract, and all security and
documents relating thereto. The preparation of documents necessary to consummate
such an assignment shall be the responsibility of the Seller or the Servicer, as
the case may be, and not the responsibility of the Trustee. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may not
enforce a Contract on the ground that it shall not be a real party in interest
or a holder entitled to enforce the Contract, the Trustee shall, at the
Servicer's expense, take such steps as directed in writing by the Servicer to
enforce the Contract, including bringing suit in the Trustee's name or the names
of the Certificateholders, provided that nothing in this Section 9.3 shall
require the Trustee to qualify to do business in a state in which it is not so
qualified on the date of this Agreement.
SECTION 9.4 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 9.1:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) the Trustee may consult with counsel and any Opinion of Counsel or
any advice of counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it under this Agreement in
good faith and in accordance with such Opinion of Counsel or advice. A copy of
any such Opinion of Counsel shall be provided to the Seller, the Servicer and
the Insurer;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or in relation to this Agreement, at
the request, order or direction of any of the Certificateholders pursuant to the
provisions of this Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the cost, expenses, and
liabilities that may be incurred
- 57 -
<PAGE> 64
therein or thereby. Nothing contained in this Agreement, however, shall relieve
the Trustee of the obligations, upon the occurrence of an Event of Default (that
shall not have been cured), to exercise such of the rights and powers vested in
it by this Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs; provided that the Trustee shall not be deemed to
have knowledge of the occurrence of an Event of Default unless and until such
knowledge shall be (i) actual knowledge of a Responsible Officer or (ii)
received in writing by a Responsible Officer;
(d) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(e) prior to the occurrence of an Event of Default and after the curing
of all Events of Default that may have occurred, the Trustee shall not be bound
to make any investigation into the facts of matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
direction, order, approval, bond, note or other paper or document, unless
requested in writing to do so by the Insurer or Holders of Certificates
evidencing in the aggregate not less than 25% of the Pool Balance; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses, or liabilities likely to be incurred by it in the making of
such investigation shall be, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such cost,
expense, or liability as a condition to so proceeding. The reasonable expense of
any and every such examination shall be paid by the Seller or, if paid by the
Trustee, shall be reimbursed by the Seller upon demand. Nothing in this clause
(e) shall affect the obligation of the Seller to observe any applicable law
prohibiting disclosure of information regarding the Obligors; provided the
Trustee shall be entitled to make such further inquiry or investigation into
such facts or matters as it may reasonably see fit, and if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books and records of the Seller, personally or by agent or attorney,
at the sole cost and expense of the Seller;
(f) the Trustee may execute any of the trust powers hereunder or perform
any duties under this Agreement either directly or by or through agents or
attorneys or a custodian or nominee and the Trustee shall not be responsible for
any misconduct or negligence on the part of, or for the supervision of any such
agent, attorney, custodian or nominee appointed with due care by it hereunder;
(g) subject to Section 9.2, the Trustee shall not be required to make
any initial or periodic examination of any documents or records related to the
Contracts for the purpose of establishing the presence or absence of defects,
the compliance by the Seller with its representations and warranties or for any
other purpose; and
(h) in the event that the Trustee is also acting as Custodian, Paying
Agent or Transfer Agent and Certificate Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article IX shall also be
afforded to such Custodian, Paying Agent, Transfer Agent and Certificate
Registrar.
- 58 -
<PAGE> 65
SECTION 9.5 Trustee Not Liable for Certificates or Contracts.
The Trustee shall make no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other than its execution
of Certificates on behalf of the Trust and the certificate of authentication on
the Certificates) or of any Contract or related document. The Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity, and enforceability of any security interest in any Financed
Vehicle or any Contract, or the perfection and priority of such a security
interest or the maintenance of any such perfection and priority, or for or with
respect to the efficacy of the Trust or its ability to generate the payments to
be distributed to Certificateholders under this Agreement, including: the
existence, condition, location, and ownership of any Financed Vehicle; the
existence and enforceability of any insurance policy thereon; the existence and
contents of any Contract or any computer or other record thereof; the validity
of the assignment of any Contract to the Trust or of any intervening assignment;
the completeness of any Contract; the performance or enforcement of any
Contract; the compliance by the Seller with any warranty or representation made
under this Agreement or in any related document and the accuracy of any such
warranty or representation prior to the Trustee's receipt of written notice of
any noncompliance therewith or any breach thereof; any investment of monies by
the Servicer or any loss resulting therefrom (it being understood that the
Trustee shall remain responsible for any Trust property that it may hold); the
acts or omissions of the Seller or any Obligor; an action of the Servicer taken
in the name of the Trustee; or any action by the Trustee taken at the
instruction of the Servicer; provided, however, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under this
Agreement. Except with respect to a claim based on the failure of the Trustee to
perform its duties under this Agreement or based on the Trustee's negligence or
willful misconduct in the performance of its duties hereunder, no recourse shall
be had for any claim based on any provision of this Agreement, the Certificates,
or any Contract or assignment thereof against the Trustee in its individual
capacity. The Trustee shall not have any personal obligation, liability, or duty
whatsoever to any Certificateholder or any other Person with respect to any such
claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity as provided in this Agreement. The
Trustee shall not be accountable for the use or application by the Seller of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Seller in respect of the Contracts.
SECTION 9.6 Trustee May Own Certificates.
The Trustee in its individual or any other capacity, and any of its
Affiliates, may become the owner or pledgee of Certificates with the same rights
as it would have if it were not Trustee, subject to the definition of the term
"Certificateholder" in Section 1.1.
SECTION 9.7 Trustee's Fees and Expenses.
The Servicer shall covenant and agree to pay to the Trustee, and the
Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
created by this Agreement and in the exercise and performance of any of the
powers and duties under this Agreement of the Trustee. Other than as included in
the Trustee's compensation, the Servicer shall pay or reimburse the Trustee upon
its request for all reasonable expenses (including,
- 59 -
<PAGE> 66
without limitation, expenses incurred in connection with notices or other
communications to Certificateholders), disbursements, and advances (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) incurred or made by the Trustee
in accordance with this Agreement or in defense of any action brought against it
in connection with this Agreement except any such expense, disbursement, or
advance as may arise from its negligence (other than errors in judgment) or bad
faith or that is the responsibility of Certificateholders under this Agreement.
Additionally, the Seller, pursuant to Section 6.1, and the Servicer, pursuant to
Section 7.1, respectively, shall have agreed to indemnify the Trustee with
respect to certain matters, and certain Certificateholders, pursuant to Section
9.4, shall have agreed to indemnify the Trustee under certain circumstances.
Notwithstanding the failure of the Servicer to perform any of its obligations
under this Section, the Trustee shall continue to perform its obligations under
this Agreement. The Servicer's covenant to pay the expenses, disbursements and
advances provided for above shall survive the termination of this Agreement.
SECTION 9.8 Indemnity of Trustee.
The Trustee and its officers, directors, agents and employees, shall be
indemnified by the Servicer and held harmless against any loss, liability, or
expense (other than any amount owing pursuant to Section 9.7) arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties contained in this Agreement including the costs and expenses of defending
against any claim or liability in connection with the exercise or performance of
any of its powers and duties hereunder to the extent that (i) the Trustee shall
not have been indemnified for such loss, liability, or expense by the Seller
pursuant to Section 6.1, the Servicer pursuant to Section 7.1, or the
Certificateholders pursuant to Section 9.4; (ii) such loss, liability, or
expense shall not have been incurred by reason of the Trustee's willful
misfeasance, bad faith, or negligence (except for errors in judgment); and (iii)
such loss, liability, or expense shall not have been incurred by reason of the
Trustee's breach of its representations and warranties pursuant to Section 9.14.
SECTION 9.9 Eligibility Requirements for Trustee.
The Trustee under this Agreement shall at all times be a depository
institution or trust company organized and doing business under the laws of any
state or the United States of America; authorized under such laws to exercise
corporate trust powers; and having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities. If such depository institution or trust company shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section 9.9, the combined capital and surplus of such depository
institution or trust company shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 9.9, the Trustee shall resign immediately in the
manner and with the effect specified in Section 9.10.
- 60 -
<PAGE> 67
SECTION 9.10 Resignation or Removal of Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Servicer. Upon receiving
such notice of resignation, the Servicer shall promptly appoint a successor
Trustee acceptable to the Insurer by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor Trustee. If no successor Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.9 and shall fail to resign after written request
therefor by the Servicer with the written consent of the Insurer, or if at any
time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt
or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation, or
liquidation, then the Servicer may, with the written consent of the Insurer,
remove the Trustee. If it shall remove the Trustee under the authority of the
immediately preceding sentence, the Servicer shall promptly appoint a successor
Trustee acceptable to the Insurer by written instrument, in duplicate, one copy
of which instrument shall be delivered to the Trustee so removed and one copy to
the successor Trustee.
If the Trustee is acting as Custodian, any resignation or removal of the
Trustee will result in the automatic termination of the Trustee's duties as
Custodian effective concurrently with such resignation or removal. Upon such
termination or removal, the Trustee shall, upon the request of the Servicer,
deliver the Contract Documents to the facilities of the successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.10 shall not become
effective until acceptance of appointment by the successor Trustee pursuant to
Section 9.11.
SECTION 9.11 Successor Trustee.
Any successor Trustee appointed pursuant to Section 9.10 shall execute,
acknowledge, and deliver to the Servicer and to its predecessor Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement, or copies thereof, at
the expense of the Servicer; and the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.11 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 9.9.
- 61 -
<PAGE> 68
Upon acceptance of appointment by a successor Trustee pursuant to this
Section 9.11, the Servicer shall mail notice of the successor of such Trustee
under this Agreement to all Holders of Certificates at their addresses as shown
in the Certificate Register. If the Servicer shall fail to mail such notice
within 10 days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Servicer.
The respective obligations of the Seller and the Servicer described in
Sections 2.7, 3.14, 6.1, 7.1, 9.5, 9.7 and 9.8 shall survive the removal or
resignation of the Trustee as provided in this Agreement or the termination of
the Trust as provided in Section 10.1.
No Trustee under this Agreement shall be liable for any action or
omission of any successor Trustee.
SECTION 9.12 Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to the business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible pursuant to Section 9.9, without the execution or
filing of any instrument or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
SECTION 9.13 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust or any Financed Vehicle may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person,
in such capacity and for the benefit of the Certificateholders, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 9.13, such powers, duties, obligations, rights, and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a written request so to do, or in case an Event of Default shall have
occurred and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 9.9 and no notice to Certificateholders of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.11.
Each and every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
- 62 -
<PAGE> 69
co-trustee is not authorized to act separately without the Trustee in
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee under this Agreement or as successor to the Servicer
under this Agreement), the Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties,
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Trustee acting jointly, or the Trustee
acting alone may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Each
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
Any separate trustee or co-trustee may at any time appoint the Trustee,
its agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. No such appointment shall affect the obligations of
the Trustee hereunder. If any separate trustee or co-trustee shall die, become
incapable of acting, resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Trustee, to
the extent permitted by law, without the appointment of a new or successor
trustee.
SECTION 9.14 Representations and Warranties of Trustee.
The Trustee hereby makes the following representations and warranties on
which the Seller and Certificateholders shall rely:
(a) the Trustee is a New York banking corporation duly organized,
validly existing, and in good standing under the laws of New York;
(b) the Trustee has full power, authority and legal right to execute,
deliver, and perform this Agreement, and has taken all necessary action to
authorize the execution, delivery, and performance by it of this Agreement;
- 63 -
<PAGE> 70
(c) the execution and delivery of this Agreement and the performance by
the Trustee of its obligations under this Agreement does not violate any
provision of the Articles of Association or Bylaws of the Trustee; and
(d) this Agreement has been duly authorized, executed and delivered by
the Trustee and shall constitute the legal, valid, and binding agreement of the
Trustee, enforceable in accordance with its terms except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to certain equitable defenses and to
the discretion of the court before which any proceeding thereof may be brought.
SECTION 9.15 Tax Returns.
The Servicer shall prepare or shall cause to be prepared any tax returns
required to be filed by the Trust and furnish to Certificateholders all
information required by the Code or the regulations thereunder and shall remit
such returns to the Trustee for signature at least five days before such returns
are due to be filed. The Trustee, upon request, will furnish the Servicer with
all such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust, and shall, upon
request, execute such returns. In no event shall the Trustee in its individual
capacity be liable for any liabilities, costs or expenses of the Trust, the
Certificateholders, the Seller or the Servicer arising under any tax law or
regulation, including, without limitation, federal, state or local income or
excise taxes or any other tax imposed on or measured by income (or any interest
or penalty with respect thereto or arising from any failure to comply
therewith).
SECTION 9.16 Trustee May Enforce Claims Without Possession of
Certificates.
All rights of action and claims under this Agreement or the Certificates
may be prosecuted and enforced by the Trustee without the possession of any of
the Certificates or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name or in its capacity as Trustee. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been recovered.
SECTION 9.17 Suits for Enforcement.
In case an Event of Default or other default by the Servicer or the
Seller hereunder shall occur and be continuing, the Trustee, in its discretion,
may proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or the enforcement of any other legal,
equitable or other remedy, as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
- 64 -
<PAGE> 71
SECTION 9.18 Maintenance of Office or Agency.
The Trustee shall maintain at its expense in New York, New York, an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served. The
Trustee initially designates the Corporate Trust Office as its office for such
purposes. The Trustee will give prompt written notice to the Servicer, the
Paying Agent, the Transfer Agent and Certificate Registrar, the Insurer and to
Certificateholders of any change in the location of such office or agency.
ARTICLE X
Termination
SECTION 10.1 Termination of the Trust.
The respective obligations and responsibilities of the Seller, the
Servicer and the Trustee created hereby and the Trust created by this Agreement
shall terminate upon the earlier of (i) the maturity or other liquidation of the
last Contract and the disposition of any amounts received upon liquidation of
any remaining Contracts in the Trust (including the purchase of the Contracts by
the Servicer pursuant to Section 10.2) and (ii) (a) the payment to
Certificateholders of all amounts required to be paid to them pursuant to this
Agreement and the disposition of all property held as part of the Trust, (b)
termination of the Financial Guarantee Insurance Policy in accordance with its
terms and surrender of the Financial Guarantee Insurance Policy to the Insurer
for cancellation, (c) the payment of all amounts owed to the Trustee under this
Agreement and (d) the payment of all amounts owed to the Insurer under the
Insurance Agreement; provided, however, that in no event shall the trust created
by this Agreement continue beyond the expiration of 21 years from the death of
the survivor of the descendants, living on the date of this Agreement, of Joseph
P. Kennedy, formerly United States representative at the Court of St. James. The
Servicer shall promptly notify the Trustee and the Insurer of any prospective
termination pursuant to this Section 10.1.
Notice of any termination, specifying the Distribution Date upon which
the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders mailed not later than the 10th day
prior to the specified Distribution Date and not earlier than the 15th day of
the month prior to the month of the specified Distribution Date stating the
amount of any such final payment, and that the Record Date otherwise applicable
to such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee therein specified. The Trustee shall give such notice to the Certificate
Registrar at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Trustee shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 4.3.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Servicer shall give a second written
notice to the remaining Certificateholders to surrender their
- 65 -
<PAGE> 72
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Servicer may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies and after all payments to be made to the Trustee and the Insurer
shall be distributed by the Trustee to a charity designated by the Servicer.
Notwithstanding any provision to the contrary, the Trustee shall retain
all of its rights and powers and obligations and duties under Section 8.5 in the
event of any Insolvency Proceeding and the Trustee shall be entitled to all the
protections, rights and immunities provided in Article IX in connection with any
such Insolvency Proceeding.
SECTION 10.2 Optional Purchase of All Contracts.
On each Distribution Date as of which the Pool Factor (after giving
effect to the Principal Distribution otherwise to be made on such Distribution
Date) shall be less than .100000, the Servicer shall have the option to purchase
the corpus of the Trust at a price equal to the Repurchase Amount plus all
amounts due and owing to the Insurer under the Insurance Agreement. To exercise
such option, the Servicer shall pay to the Trustee by deposit into the
Collection Account: (1) for the benefit of the Certificateholders, the
Repurchase Amount of all Contracts that were Outstanding at the beginning of the
Collection Period ending immediately prior to such Distribution Date, and (2)
for the benefit of the Insurer, all amounts due and owing to the Insurer
pursuant to the Insurance Agreement. Such purchase shall be deemed to have
occurred on the last day of such Collection Period.
ARTICLE XI
Miscellaneous Provisions
SECTION 11.1 Amendment.
This Agreement may be amended by the Seller, the Servicer and the
Trustee, collectively with the prior written consent of the Insurer, but without
the consent of any of the Certificateholders, to cure any ambiguity, to correct
or supplement any provisions in this Agreement, or to add any other provisions
with respect to matters or questions arising under this Agreement that shall not
be inconsistent with the provisions of this Agreement; provided, however, that
such action shall not materially and adversely affect the interests of any
Certificateholder; provided further, however, that any such amendment shall not
be deemed to materially and adversely affect the interests of any
Certificateholder if the Person requesting the amendment obtains a letter from
each Rating Agency to the effect that the amendment would not result in a
downgrading or withdrawal of the ratings then assigned to the Certificates by
such Rating Agency, without regard to the Financial Guarantee Insurance Policy.
This Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 51%
- 66 -
<PAGE> 73
of the Pool Balance, and the Insurer, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Contracts or distributions that shall be required to
be made on any Certificate or (ii) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of the Holders of all
Certificates then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the next preceding paragraph, the Trustee shall furnish written notification
of the substance of such amendment or consent to each Certificateholder.
It shall not be necessary for the consent of Certificateholders pursuant
to this Section 11.1 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe. Any consent by the
Holder of a Certificate to an amendment of the Agreement shall be conclusive and
binding on such Holder and upon all future Holders of such Certificate and of
any Certificate issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon such
Certificate.
The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise and any such amendment shall be unenforceable in its
entirety absent the execution of such amendment by the Trustee.
SECTION 11.2 Protection of Title to Trust.
(a) The Servicer shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain, and
protect the interest of the Certificateholders, the Insurer and the Trustee
under this Agreement in the Contracts and in the proceeds thereof. The Servicer
shall deliver (or cause to be delivered) to the Trustee file-stamped copies of,
or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity,
or corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed by the Servicer in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee and the
Insurer at least 60 days' prior written notice thereof.
(c) The Seller and the Servicer shall give the Trustee and the Insurer
at least 60 days' prior written notice of any relocation of the principal
executive office of the Seller and the Servicer if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of any
new financing
- 67 -
<PAGE> 74
statement. The Servicer shall at all times maintain each office from which it
shall service Contracts, and its principal executive office, within the United
States of America.
(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Contract, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Contract and the amounts from time to time deposited in or credited to the
Certificate Account and Payahead Account in respect of such Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems so that, from and after the time of sale under this Agreement of the
Contracts to the Trust, the Servicer's master computer records (including any
back-up archives) that shall refer to a Contract indicate clearly that such
Contract is owned by the Trustee as trustee of the Trust. Indication of the
Trustee's ownership of a Contract shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Contract shall have been
paid in full or repurchased or shall have become a Liquidated Contract.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
retail installment sales contracts to any prospective purchaser, lender, or
other transferee, the Servicer shall give or cause to be given to such
prospective purchaser, lender, or other transferee computer tapes, records or
print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Contract, shall indicate clearly that such
Contract has been sold and is owned by the Trust.
(g) The Servicer shall permit the Trustee, the Insurer and their
respective agents at any time during normal business hours to inspect, audit,
and make copies of and abstracts from the Servicer's records regarding any
Contract.
(h) Upon request, the Servicer shall furnish to the Trustee and the
Insurer, within five Business Days, a list of all Contracts then held as part of
the Trust, together with a reconciliation of such list to the Schedule of
Contracts and to each of the Servicer's Certificates furnished before such
request indicating removal of Contracts from the Trust.
(i) The Servicer shall deliver to the Trustee and the Insurer:
(i) promptly after the execution and delivery of this Agreement
and of each amendment hereto, an Opinion of Counsel either (A) stating
that, in the opinion of such Counsel, all financing statements and
continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trustee and the
Insurer in the Contracts, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given
or (B) stating that, in the opinion of such Counsel, no such action
shall be necessary to preserve and protect such interest; and
(ii) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cut-Off Date an Opinion of
- 68 -
<PAGE> 75
Counsel, dated as of a date during such 90-day period, either (A)
stating that, in the opinion of such counsel, all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trustee in
the Contracts, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given or (B) stating
that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable law, cause
the Certificates to be registered with the Securities and Exchange Commission
pursuant to Section 12(b) or Section 12(g) of the Securities Exchange Act of
1934, as amended, within the time periods specified in such sections.
(k) For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterpart shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.
SECTION 11.3 Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties to
this Agreement or any of them.
Except as expressly provided herein, no Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Trust, or the obligations of the parties to this Agreement, nor shall
anything in this Agreement set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken pursuant to any provision of this Agreement.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing in the aggregate not less than 25%
of the Pool Balance with the consent of the Insurer shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee under this Agreement and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses, and
liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request, and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; no one or
more Holders of Certificates shall have any right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holders, or to enforce any right, under this Agreement, except in the
manner
- 69 -
<PAGE> 76
provided in this Agreement and for the equal, ratable, and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 11.3, each Certificateholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
SECTION 11.4 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS EXCEPT
THAT THE DUTIES OF THE TRUSTEE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
SECTION 11.5 Notices.
All demands, notices, and communications under this Agreement shall be
in writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (i) in the
case of the Seller, at 8001 Irvine Center Drive, 6th Floor, Irvine, CA 92618,
Attention: President, facsimile 714-450-5530, (ii) in the case of the Servicer,
at 8001 Irvine Center Drive, 5th Floor, Irvine, California 92618, Attention:
Regan E. Kelly, Executive Vice President, facsimile 714-450-5530, (iii) in the
case of the Insurer, at _____________________ _____________________________, and
(iv) in the case of the Trustee, at the Corporate Trust Office. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Registrar. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder shall receive such notice.
SECTION 11.6 Severability of Provisions.
If any one or more of the covenants, agreements, provisions, or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions, or terms shall be deemed severable from the
remaining covenants, agreements, provisions, or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 11.7 Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 6.2 and 7.2, neither the Seller nor the Servicer may
transfer or assign all, or a portion of, its rights, obligations and duties
under this Agreement unless such transfer or assignment (i) (A) will not result
in a reduction or withdrawal by any Rating Agency of the rating then assigned by
it to the Certificates and (B) the Trustee and the Insurer have consented to
such transfer or assignment, or (ii) the Insurer, the Trustee and Holders of
Certificates evidencing not less than 51% of the Pool Balance consent thereto.
Any transfer or assignment with respect to the Servicer of all of its rights,
obligations and duties will not become effective until a successor Servicer has
assumed the Servicer's rights, duties and obligations under this Agreement. In
the event of a transfer or assignment pursuant to clause (ii) above, each Rating
Agency shall be provided with notice of such transfer or assignment.
- 70 -
<PAGE> 77
SECTION 11.8 Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the
Trust. The interests represented by the Certificates shall be nonassessable for
any losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Trustee pursuant to Section 5.2, Certificates
shall be deemed fully paid.
SECTION 11.9 Third Party Beneficiaries.
Except as otherwise specifically provided herein with respect to the
Certificateholders, the parties to this Agreement hereby manifest their intent
that no third party other than the Insurer shall be deemed a third party
beneficiary of this Agreement, and specifically that the Obligors are not third
party beneficiaries of this Agreement.
SECTION 11.10 Insurer Default or Insolvency.
If a default under the Financial Guarantee Insurance Policy has occurred
and is continuing or an Insurer Insolvency has occurred, any provision giving
the Insurer the right to direct, appoint or consent to, approve of, or take or
cause to be taken any action (or waive any right to take action) under this
Agreement, including but not limited to the right to terminate or cause the
termination of the Servicer as provided in Section 8.1, shall be inoperative
during the period of such default or the period from and after such Insurer
Insolvency and such consent or approval shall be deemed to have been given for
the purpose of such provisions; provided that the consent of the Insurer shall
be required at all times with respect to any amendment of this Agreement
pursuant to Section 11.1.
SECTION 11.11 Tax Matters.
The parties hereto intend that the Trust shall be a grantor trust for
federal and state income tax purposes and not an association taxable as a
corporation. All provisions of this Agreement shall be construed so as to
effectuate such intent. For income tax purposes, the Seller, the
Certificateholders, and each Certificate Owner, by accepting a beneficial
interest in a Certificate agree to treat the Certificates as ownership interests
in the Contracts (other than the Retained Strip, which the Seller shall treat as
its property), and any other Trust Property. For purposes of this Agreement,
"Retained Strip" shall mean the portion of the interest due on each Contract
which has a yield in excess of 7.13%.
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
- 71 -
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
ONYX ACCEPTANCE FINANCIAL CORPORATION,
as Seller
By:______________________________________
Name:____________________________________
Title:___________________________________
ONYX ACCEPTANCE CORPORATION,
as Servicer
By:______________________________________
Name:____________________________________
Title:___________________________________
______________________________,
not in its individual capacity but solely
as Trustee
By:______________________________________
Name:____________________________________
Title:___________________________________
- 72 -
<PAGE> 79
Exhibit A
Form of Appointment
of Custodian
[Name and address of Custodian]
Re: Onyx Acceptance Grantor Trust 199_-_
$____________ _____% Auto Loan
Pass-Through Certificates, Series 199_-_
Dear Sirs:
Reference is hereby made to the Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") dated as of _______, 199__ by and among Onyx
Acceptance Corporation, ______________, as Trustee (the "Trustee"), Onyx
Acceptance Financial Corporation and you. Terms used herein which are defined in
the Pooling and Servicing Agreement have the respective meanings set forth in
the Pooling
and Servicing Agreement .
The Trustee hereby revocably appoints you as the agent of the Trustee to
act as custodian, in accordance with the terms and provisions of the Pooling and
Servicing Agreement, for the Contract Documents listed in Section 2.4 of the
Pooling and Servicing Agreement relating to each Contract and the related
Obligor and Financed Vehicle. Please acknowledge your acceptance of such
appointment and your agreement to act as custodian in accordance with the terms
and provisions of the Pooling and Servicing Agreement by signing below in the
space indicated therefor.
By accepting such appointment you acknowledge that the Trustee may
terminate such appointment at any time, with or without cause, by written notice
to you.
Very truly yours,
________________________________________,
not in its individual capacity,
but solely as Trustee
By: ____________________________________
Name:
Title:
A-1
<PAGE> 80
ACCEPTED AND AGREED:
ONYX ACCEPTANCE CORPORATION
By: ______________________________
Name:
Title:
CONSENTED AND AGREED:
___________________________________
By: ______________________________
Name:
Title:
A-2
<PAGE> 81
EXHIBIT B
Form of Certificate
[Exhibit Begins on Next Page]
B-1
<PAGE> 82
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
ONYX ACCEPTANCE GRANTOR TRUST 1991__-__
_____% AUTO LOAN PASS-THROUGH CERTIFICATE, SERIES 199__-__
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of fixed rate Rule of 78's and Simple Interest
Method motor vehicle retail installment sale contracts secured by new and used
automobiles and light-duty trucks, sold to Onyx Acceptance Grantor Trust 1998-1
by Onyx Acceptance Financial Corporation
(This Certificate does not represent an interest in or obligation of Onyx
Acceptance Financial Corporation, Onyx Acceptance Corporation, or any of their
respective affiliates.)
Certificate No. R-__ CUSIP _____________
$________________________
Final Distribution Date:
___________, 200__
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a ONE
HUNDRED SEVENTY-THREE MILLION DOLLAR nonassessable, fully paid, fractional
undivided interest in the Onyx Acceptance Grantor Trust 199__-__ (the "Trust")
formed by Onyx Acceptance Financial Corporation (the "Seller"). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of __________,
199__ (the "Agreement") among the Seller, Onyx Acceptance Corporation, as
Servicer (the "Servicer") and __________________________, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. This Certificate is one of the duly authorized "Certificates"
referred to in the Agreement (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions, and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
The property in the trust includes: (i) a pool of fixed rate Rule of 78's and
Simply Interest Method motor vehicle retail installment sales contracts (the
"Contracts") purchased from the Seller and secured by new and used automobiles
and
B-2
<PAGE> 83
light-duty trucks (the "Financial Vehicle"), (ii) certain documents relating to
the Contracts, (iii) certain monies due thereunder on or after the Cut-Off Date,
(iv) security interests in the Financed Vehicles and the rights to receive
proceeds from claims on certain insurance policies covering the Financed
Vehicles or the individual Obligor under each related Contract and the right to
certain proceeds under the Blanket Insurance Policy, (v) all accounts on deposit
in the Collection Account, including all Eligible Investments credited thereto
(but excluding investment earnings thereon), (vi) the benefits under an
irrevocable financial guarantee insurance policy (the "Guaranty") issued by
________________________ (the "Insurer"), (vii) certain rights of the Seller
under the Purchase Agreement to cause Onyx to repurchase certain Contracts under
certain circumstances, and (ix) all proceeds of the foregoing.
Under the Agreement, there will be a monthly pro rata
distribution to the Certificateholders of record on the 15th day of each month
or, if such 15th day is not a Business Day, the next succeeding Business Day
(the "Distribution Date"), commencing on ____________, 199__, of such
Certificateholder's fractional undivided interest in all amounts allocable to
principal and interest from any applicable source described in the Agreement.
The monthly interest on each given Distribution Date shall be the product of
one-twelfth the Pass-Through Rate and the Pool Balance as of the close of the
preceding Collection Period (or if the current Distribution Date is the first
Distribution Date, as of the Closing Date) plus the amount of interest
previously due but not paid to Certificateholders, if any. The monthly principal
on each given Distribution Date shall be the sum of the Aggregate Schedules
Balance Decline during the related Collection Period. The distribution is more
fully described in the Agreement.
Distributions on this Certificate will be made by the Trustee by
check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement, and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Trustee and Certificate Registrar in the
Borough of Manhattan, the City of New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
All capitalized terms used herein not otherwise defined shall
have the meaning assigned thereto in the Agreement.
Unless the authentication hereon shall have been executed by an
authorized officer of the Trustee or by an authenticating agent acting on behalf
of the Trustee, by manual signature, this certificate shall not entitle the
holder hereof to any benefit under the Agreement or be valid for any purpose.
B-3
<PAGE> 84
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust, and not
in its individual capacity, has caused this Certificate to be duly executed.
ONYX ACCEPTANCE GRANTOR TRUST 199__-__
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Trustee
By:_____________________________________
Authorized Signatory
This is one of the Certificates referred to in the
within-mentioned Agreement.
BANKERS TRUST COMPANY, as Trustee
By:______________________________________
Authorized Signatory
B-4
<PAGE> 85
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Trustee or any affiliate of any of
them. The Certificates are limited in right of payment to certain collections
and recoveries respecting the Contracts and payments under the Guarantee, all as
more specifically set forth herein and in the Agreement. A copy of the Agreement
may be examined by any Certificateholder upon request during normal business
hours at the corporate administrative offices of the Seller currently located at
8001 Irvine Center Drive, 6th Floor, Irvine, California 92618 and at such other
places, if any, designated by the Seller.
The Agreement permits, with certain exceptions therein provided,
the amendment and the modification of the rights and obligations of the Seller
and the Servicer and the rights of the Certificateholders under the Agreement at
any time by the Seller, the Servicer and the Trustee with the consent of the
Holders of certificates evidencing in the aggregate not less than 51% of the
Pool Balance and the Insurer provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Contracts or distributions that shall be
required to be made on any Certificate or (b) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the Holders of
all Certificates then outstanding. Any such consent by the Holder of a
Certificate to an amendment of the Agreement shall be conclusive and binding on
such Holder and upon all future Holders of such Certificate and of any
Certificate issued upon the transfer thereof or in exchange hereof or in lieu
thereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holder of any of the Certificates.
As provided in the Agreement, the transfer of this Certificate is
registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies maintained by the Trustee in
its capacity as Certificate Registrar, or by any successor Certificate
Registrar, in the Borough of Manhattan, the City of New York, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of authorized denominations evidencing the same aggregate interest int he Trust
will be issued to the designated transferee.
The Certificates are issuable only as registered Certificates
without coupons in denominations of $1,000 and integral multiples thereof except
that one Certificate may be issued in a denomination that includes any residual
portion of the Original Pool Balance. As provided in the Agreement, Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge payable in connection therewith.
B-5
<PAGE> 86
The Trustee, the Certificate Registrar, and any agent of the
Trustee or the Certificate Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Certificate Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the earlier of (i) the maturity
or other liquidation of the last Contract (including pursuant to the Servicer's
option to purchase the Contracts) and the disposition of any amounts received
upon liquidation of any remaining Contracts in the Trust as provided in the
Agreement and (ii) (a) the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Agreement and the disposition of all property
held as part of the Trust, (b) termination of the Guarantee in accordance with
its terms and the surrender of the Guarantee to the Insurer for cancellation,
(c) the payment of all amounts owed to the Trustee under the agreement and (d)
the payment of all amounts owed to the Insurer under the Insurance Agreement.
The Servicer's exercise of its right to purchase all the Contracts and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only as of a Distribution Date as of which
the Pool Balance (after giving effect to the Principal Distribution for such
Distribution Date) shall be 10% or less of the sum of the Original Pool Balance.
B-6
<PAGE> 87
EXHIBIT C
Form of Surety Bond
[Exhibit Begins on Next Page]
C-1
<PAGE> 1
EXHIBIT 4.5
FORM OF ADMINISTRATION AGREEMENT
among
ONYX ACCEPTANCE OWNER TRUST 199_-_,
as Issuer
ONYX ACCEPTANCE CORPORATION
as Administrator
and
------------,
as Indenture Trustee
Dated as of ____________, 199__
<PAGE> 2
ADMINISTRATION AGREEMENT dated as of _______, 199_, among ONYX
ACCEPTANCE OWNER TRUST, a Delaware business trust (the "Issuer"), ONYX
ACCEPTANCE CORPORATION, a Delaware corporation, as administrator (the
"Administrator"), and _________, a [Delaware banking corporation], not in its
individual capacity but solely as Indenture Trustee (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS beneficial ownership interests in the Issuer represented by
certificates (the "Certificates") have been issued in connection with the
formation of the Issuer pursuant to the Trust Agreement dated as of _________,
199_ (the "Trust Agreement"), between Onyx Acceptance Financial Corporation
("Finco"), a Delaware corporation, as depositor, and _________, as owner trustee
(the "Owner Trustee"), to the owners thereof (the "Owners");
WHEREAS the Issuer is issuing the Onyx Acceptance Owner Trust 199_-_
Class A-1 ____% Auto Loan Backed Notes, Class A-2 ___% Auto Loan Backed Notes
and Class A-3 ___% Auto Loan Backed Notes (collectively, the "Notes") pursuant
to the Indenture dated as of _______, 199_ (as amended and supplemented from
time to time, the "Indenture"), between the Issuer and the Indenture Trustee
(capitalized terms used herein and not defined herein shall have the meanings
assigned such terms in the Indenture, the Trust Agreement or the Sale and
Servicing Agreement dated as of _____, 199_, among the Issuer, Onyx, as
servicer, and Finco, as seller, as the case may be);
WHEREAS the Issuer has entered into certain agreements in connection
with the issuance of the Certificates and the Notes, including the Basic
Documents;
WHEREAS, pursuant to the Basic Documents, the Issuer and the Indenture
Trustee are required to perform certain duties in connection with the
Certificates, the Notes and the Collateral;
WHEREAS the Issuer and the Indenture Trustee desire to appoint Onyx as
administrator to perform certain of the duties of the Issuer and the Owner
Trustee under the Basic Documents and to provide such additional services
consistent with the terms of this Agreement and the Basic Documents as the
issuer and the Owner Trustee may from time to time request; and
WHEREAS the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1. Duties of the Administrator.
(a) DUTIES WITH RESPECT TO THE DEPOSITORY AGREEMENTS AND THE INDENTURE.
(i) The Administrator agrees to perform all its duties as
Administrator and the duties of the Issuer under the Depository
Agreements. In addition, the Administrator shall consult with the Owner
Trustee regarding the duties of the Issuer under the Indenture and the
Depository Agreements. The Administrator shall monitor the performance
of the Issuer and shall advise the Owner Trustee when action by the
Issuer or the Owner Trustee is necessary to comply with the Issuer's
duties under
<PAGE> 3
the Indenture and the Depository Agreements. The Administrator shall
prepare for execution by the Issuer or shall cause the preparation by
other appropriate persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture and the
Depository Agreements. In furtherance of the foregoing, the
Administrator shall take all appropriate action that is the duty of the
Issuer to take pursuant to the Indenture including, without limitation,
such of the foregoing as are required with respect to the following
matters under the Indenture (references are to sections of the
Indenture):
(A) causing the Note Register to be kept and giving the Indenture
Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.4);
(B) preparing the notification to Noteholders of the final
principal payment on their Notes (Section 2.7(b));
(C) fixing or causing to be fixed any specified record date and
the notification of the Indenture Trustee and Noteholders with respect
to special payment dates, if any (Section 2.7(c));
(D) preparing or obtaining the documents and instruments required
for the proper authentication of Notes and delivering the same to the
Indenture Trustee (section 2.2);
(E) preparing, obtaining and/or filing of all instruments,
opinions and certificates and other documents required for the release
of collateral (Section 2.9) ;
(F) maintaining an office in the [Borough of Manhattan], City of
New York, for the registration of transfer or exchange of Notes (Section
3.2);
(G) causing newly appointed Paying Agents, if any, to deliver to
the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section 3.3);
(H) directing the Indenture Trustee to deposit moneys with Paying
Agents, if any, other than the Indenture Trustee (Section 3.3);
(I) obtaining and preserving the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture,
the Notes, the Collateral and each other instrument and agreement
included in the Trust Estate (Section 3.4);
(J) preparing all supplements, amendments, financing statements,
continuation statements, instruments of further assurance and other
instruments, in accordance with Section 3.05 of the Indenture, necessary
to protect the Trust Estate (Section 3.5);
(K) delivering the required Opinions of Counsel on the Closing
Date and annually, in accordance with Section 3.6 of the Indenture, and
delivering the annual Officers' Certificates and certain other
statements as to compliance with the Indenture, in accordance with
Section 3.9 of the Indenture (Sections 3.6 and 3.9);
-2-
<PAGE> 4
(L) identifying to the Indenture Trustee in an Officers'
Certificate and Person with whom the Issuer has contracted to perform
its duties under the Indenture (Section 3.7(b));
(M) notifying the Indenture Trustee and the Rating Agencies of
any Servicer Default pursuant to the Sale and Servicing Agreement and,
if such Servicer Default arises from the failure of the Servicer to
perform any of its duties under the Sale and Servicing Agreement, taking
all reasonable steps available to remedy such failure (Section 3.7(d));
(N) preparing and obtaining documents and instruments required
for the release of the Issuer from its obligations under the Indenture
(Section 3.11(b));
(O) delivering notice to the Indenture Trustee of each Event of
Default and each other default by the Servicer or the Seller under the
Sale and Servicing Agreement (Section 3.19);
(P) monitoring the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's
Certificate and obtaining the Opinion of Counsel and the Independent
Certificate relating thereto (Section 4.1);
(Q) [complying with any written directive of the Indenture
Trustee with respect to any sale of any portion of the Trust Estate in
connection with any Event of Default (Section 5.4);]
(R) preparing and delivering of notice to Noteholders of any
removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee (Section 6.8);
(S) preparing all written instruments required to confirm the
authority of any co-trustee or separate trustee and any written
instruments necessary in connection with the resignation or removal of
any co-trustee or separate trustee (Sections 6.8 and 6.10);
(T) furnishing the Indenture Trustee with the names and addresses
of Noteholders during any period when the Indenture Trustee is not the
Note Registrar (Section 7.1);
(U) preparing and, after execution by the Issuer, filing with the
Commission, any applicable state agencies and the Indenture Trustee of
documents required to be filed on a periodic basis with the Commission
and any applicable state agencies (including any summaries thereof
required by rules and regulations prescribed thereby), and transmitting
of such summaries to the Noteholders (Section 7.3);
(V) opening the Trust Accounts, preparing the related Issuer
Orders, Officers' Certificates and Opinions of Counsel and all other
actions necessary with respect to investment and reinvestment of funds
in the Trust Accounts (Sections 8.2 and 8.3);
(W) preparing any Issuer Request and Officers' Certificates and
obtaining any Opinions of Counsel and Independent Certificates necessary
for the release of the Trust Estate (Sections 8.4 and 8.5);
(X) preparing Issuer Orders and obtaining Opinions of Counsel
with respect to the execution of any supplemental indentures, and
mailing notices to the Noteholders with respect thereto (Sections 9.1,
9.2 and 9.3);
-3-
<PAGE> 5
(Y) executing and delivering new Notes conforming to the
provisions of any supplemental indenture, as appropriate (Section 9.6);
(Z) notifying Noteholders of any redemption of the Notes or
causing the Indenture Trustee to provide such notice (Section 10.2);
(AA) preparing all Officers' Certificates, Opinions of Counsel
and Independent Certificates with respect to any requests by the Issuer
of the Indenture Trustee to take any action under the Indenture (Section
11.1(a));
(BB) preparing and delivering Officers' Certificates and
obtaining Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.1(b));
(CC) notifying the Rating Agencies, upon any failure of the
Indenture Trustee to give such notification, of the information required
pursuant to Section 11.4 of the Indenture (Section 11.4);
(DD) preparing and delivering to Noteholders and the Indenture
Trustee any agreements with respect to alternate payment and notice
provisions (Section 11.06);
(EE) recording the Indenture, if applicable (Section 11.15); and
(ii) The Administrator also will:
(A) pay the Indenture Trustee from time to time the reasonable
compensation provided for in the Indenture with respect to services
rendered by the Indenture Trustee under the Indenture (which
compensation shall not be limited by any provision of law in regard to
the compensation of a Trustee of an express trust);
(B) reimburse the Indenture Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee in accordance with any provision of the Indenture
(including the reasonable compensation, expenses and disbursements of
its agents and counsel) to the extent the Indenture Trustee is entitled
to such reimbursement by the Issuer under the Indenture;
(C) indemnify the Indenture Trustee for, and hold it harmless
against, any losses, liability or expense incurred without negligence or
bad faith on the part of the Indenture Trustee, arising out of or in
connection with the acceptance or administration of the trusts and
duties contemplated by the Indenture, including the reasonable costs and
expenses of defending themselves against any claim or liability in
connection therewith to the extent the Indenture Trustee is entitled to
such indemnification from the Issuer under the Indenture; and
(D) indemnify the Owner Trustee for, and hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on the part of the Owner Trustee, arising out of or in
connection with the acceptance or administration of the transactions
contemplated by the Trust Agreement, the Indenture, the Depository
Agreements or this Administration Agreement, including the reasonable
costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of their
powers or duties under the Trust Agreement.
-4-
<PAGE> 6
(b) ADDITIONAL DUTIES.
(i) In addition to the duties of the Administrator set forth
above, the Administrator shall perform such calculations, and shall
prepare for execution by the Issuer or the Owner Trustee or shall cause
the preparation by other appropriate persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be
the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to the Basic Documents, and at the request of the Owner Trustee
shall take all appropriate action that it is the duty of the Issuer or
the Owner Trustee to take pursuant to the Basic Documents. Subject to
Section 5 of this Agreement, and in accordance with the directions of
the Owner Trustee, the Administrator shall administer, perform or
supervise the performance of such other activities in connection with
the Collateral (including the Basic Documents) as are not covered by any
of the foregoing provisions and as are expressly requested by the Owner
Trustee and are reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding
tax is imposed on the Issuer's payments (or allocations of income) to an
Owner as contemplated in [Section 5.2(c) of the Trust Agreement]. Any
such notice shall specify the amount of any withholding tax required to
be withheld by the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in [Section
5.4(a), (b), (c) and (d) of the Trust Agreement] with respect to, among
other accounting and reports to Owners; provided, however, that the
Owner Trustee shall remain exclusively responsible for the distribution
of the Schedule K-1s necessary to enable each Owner to prepare its
federal and state income tax returns.
(iv) The Administrator shall satisfy its obligations with respect
to clauses (ii) and (iii) above by retaining, at the expense of the
Issuer payable by the Administrator, a firm of independent public
accountants (the "Accountants") acceptable to the Owner Trustee which
shall perform the obligations of the Administrator thereunder. In
connection with paragraph (ii) above, the Accountants will provide prior
to _________, a letter in form and substance satisfactory to the Owner
Trustee as to whether any tax withholding is then required and, if
required, the procedures to be followed with respect thereto to comply
with the requirements of the Code. The Accountants shall be required to
update the letter in each instance that any additional tax withholding
is subsequently required or any previously required tax withholding
shall no longer be required.
(v) The Administrator shall perform the duties of the
Administrator specified in [Section 10.2] of the Trust Agreement
required to be performed in connection with the resignation or removal
of the Owner Trustee, and any other duties expressly required to be
performed by the Administrator under the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Administrator's opinion, no less favorable to the
Issuer than would be available from unaffiliated parties.
-5-
<PAGE> 7
(c) NON-MINISTERIAL MATTERS.
(i) With respect to matters that in the reasonable judgment of
the Administrator are non-ministerial, the Administrator shall not take
any action unless within a reasonable time before the taking of such
action the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include, without limitation:
(A) the amendment of the Indenture or execution of any supplement
to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the
Receivables);
(C) the amendment, change or modification of any of the Basic
Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents or successor Indenture Trustees pursuant to the Indenture
or the appointment of successor Administrators or Successor Servicers,
or the consent to the assignment by the Note Registrar, Paying Agent or
Indenture Trustee of its obligations, under the Indenture; and
(E) the removal of the indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement,
the Administrator shall not be obligated to, and shall not, (x) make any
payments to the Noteholders under the Basic Documents, (y) sell the
Trust Estate pursuant to Section 5.4 of the Indenture or (z) take any
other action that the issuer directs the Administrator not to take on
its behalf.
2. Records. The Administrator shall maintain appropriate books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer and the
Company at any time during normal business hours.
3. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to a fee of
$________ per month which shall be solely an obligation of the Servicer.
4. Additional Information to be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall, reasonably request.
5. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer hereunder or otherwise, the
Administrator shall have no authority to act for or represent the Issuer or the
Owner Trustee, and shall not otherwise be or be deemed an agent of the Issuer or
the Owner Trustee.
-6-
<PAGE> 8
6. No Joint Venture. Nothing contained in this Agreement shall (i)
constitute the Administrator and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) be construed to impose
any liability as such on any of them or (iii) be deemed to confer on any of them
any express, implied or apparent authority to incur any obligation or liability
on behalf of the others.
7. Other Activities of Administrator. Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its or
their sole discretion, from acting as an administrator for any other person or
entity, or in a similar capacity therefor, even though such person or entity may
engage in business activities similar to those of the Issuer, the Owner Trustee
or the Indenture Trustee.
8. Term of Agreement; Resignation and Removal of Administrator.
(a) This Agreement shall continue in force until the dissolution of the
Issuer, upon which event this Agreement shall automatically terminate.
(b) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days, prior written notice.
(c) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days, prior
written notice.
(d) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of termination from
the Issuer to the Administrator if any of the following events shall occur:
(i) the Administrator shall fail to perform in any material
respect any of its duties under this Agreement and, after notice of such
default, shall not cure such default within ______ days (or, if such
default cannot be cured in such time, shall not give within such ______
days such assurance of timely and complete cure as shall be reasonably
satisfactory to the Issuer);
(ii) the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a trustee in bankruptcy, conservator, receiver or
liquidator for the Administrator (or, so long as the Administrator is
Onyx, the Seller) in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding up or liquidation of their respective affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of ______ consecutive days; or
(iii) the consent by the Administrator (or, so long as the
Administrator is Onyx, the Seller) to the appointment of a trustee in
bankruptcy, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Administrator (or, so long
as the Administrator is Onyx, the Seller) of or relating to
substantially all of their property, or the Administrator (or, so long
as the Administrator is Onyx, the Seller) shall admit in writing its
inability to pay its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations. The Administrator agrees
that if any of the events specified in clauses (ii) or (iii) of this
Section shall occur, it shall give written
-7-
<PAGE> 9
notice thereof to the Issuer, the Owner Trustee and the Indenture
Trustee within seven days after the happening of such event.
(e) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective
only after each Rating Agency has provided to the Owner Trustee and the
Indenture Trustee written notice that the proposed appointment will not result
in the reduction or withdrawal of any rating then assigned by such Rating Agency
to any class of Notes or the Certificates.
(g) Subject to Section 8(e) and 8(f), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and such
Successor Servicer shall automatically succeed to the rights, duties and
obligations of the Administrator under this Agreement.
9. Action upon Termination, Resignation or Removal. Promptly upon the
effective date of termination of this Agreement pursuant to Section 8(a) or the
resignation or removal of the Administrator pursuant to Section 8(b) or (c),
respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 8(a) deliver to or to the order of the Issuer all property
and documents of or relating to the Collateral then in the custody of the
Administrator in the event of the resignation or removal of the Administrator
pursuant to Section 8(b) or (c), respectively, the Administrator shall cooperate
with the Issuer and take all reasonable steps requested to assist the Issuer in
making an orderly transfer of the duties of the Administrator.
10. Notices. Any notice, report or other communication given hereunder
shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to
Onyx Acceptance Owner Trust 199_-_
In care of_______________________________
_________________________________________
Attention:_______________________________
(b) if to the Administrator, to
Onyx Acceptance Corporation
8001 Irvine Center Drive, 5th Floor
Irvine, California 92618
(c) if to the Indenture Trustee, to
_________________________________________
_________________________________________
Attention:_______________________________
-8-
<PAGE> 10
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand delivered
to the address of such party as provided above.
11. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee,
without the consent of the Noteholders or the Certificateholders, for the
purpose of adding any provisions to or modifying or changing in any manner or
eliminating any of the provisions of this Agreement; provided that such
amendment does not and will not, in the Opinion of Counsel satisfactory to the
Indenture Trustee, materially and adversely affect the interest of any
Noteholder or Certificateholder. This Agreement may also be amended by the
Issuer, the Administrator and the Indenture Trustee with the written consent of
the Owner Trustee and the holders of Notes evidencing at least a majority in the
Outstanding Amount of the Notes and the holders of Certificates evidencing at
least a majority of the Certificate Balance for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of Noteholders or the
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made for the benefit of the Noteholders or Certificateholders or (ii) reduce the
aforesaid percentage of the holders of Notes and Certificates which are required
to consent to any such amendment, without the consent of the holders of all the
outstanding Notes and Certificates.
12. Successor and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and the conditions precedent to appointment of
a successor Administrator set forth in Section 8 are satisfied. An assignment
with such consent and satisfaction, if accepted by the assignee, shall bind the
assignee hereunder in the same manner as the Administrator is bound hereunder.
Notwithstanding the foregoing, this Agreement may be assigned by the
Administrator without the consent of the Issuer or the Owner Trustee to a
corporation or other organization that is a successor (by merger, consolidation
or purchase of assets) to the Administrator, provided that such successor
organization executes and delivers to the Issuer, the Owner Trustee and the
Indenture Trustee an agreement in which such corporation or other organization
agrees to be bound hereunder by the terms of said assignment in the same manner'
as the Administrator is bound hereunder. Subject to the foregoing, this
Agreement shall bind any successors or assigns of the parties hereto.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of [New York], without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
14. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each
of which when so executed shall together constitute but one and the same
agreement.
16. Severability of Provisions. If any one or more of the agreements,
provisions or terms of this Agreement shall be for any reason whatsoever held
invalid or unenforceable in any jurisdiction, then such agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the other rights of
the parties hereto.
-9-
<PAGE> 11
17. Not Applicable to Onyx in Other Capacities. Nothing in this
Agreement shall affect any obligation Onyx may have in any other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee. (a)
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by _______________ not in its individual capacity but solely
in its capacity as Owner Trustee of the Issuer and in no event shall
_______________ in its individual capacity or any Owner have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
[Articles VI, VII and VIII] of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by _________________ not in its individual
capacity but solely as Indenture Trustee and in no event shall
_____________________ have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
19. Third-Party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
-10-
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
ONYX ACCEPTANCE OWNER TRUST 199_-_
By: [Name of Owner Trustee]
not in its individual capacity
but solely as Owner Trustee,
By:________________________________
Name:___________________________
Title:__________________________
[Name of Indenture Trustee]
not in its individual capacity but
solely as Indenture Trustee,
By:_____________________________________
Name:________________________________
Title:_______________________________
ONYX ACCEPTANCE CORPORATION,
as Administrator,
By:_____________________________________
Name:________________________________
Title:_______________________________
-11-
<PAGE> 1
EXHIBIT 5.1(a)
[LETTERHEAD OF ANDREWS & KURTH L.L.P.]
April 28, 1998
Onyx Acceptance Financial Corporation
8001 Irvine Center Drive, 6th Floor
Irvine, California 96218
Re: Onyx Acceptance Financial Corporation
Registration Statement on Form S-3 (the "Registration Statement")
Dear Gentlemen:
We have acted as special counsel for Onyx Acceptance Financial
Corporation, a corporation organized under the laws of the State of Delaware
(the "Company"), and certain trusts, all of the beneficial ownership of which
will be initially owned by the Company (together with the Company, each an
"Issuer"), in connection with the proposed issuance by each Issuer of its Auto
Loan Backed Notes (the "Notes"). The Notes are to be issued pursuant to the
Indenture for each series, each between the applicable Issuer and the Indenture
Trustee (as defined therein). The Indenture, in the form filed with the
Securities and Exchange Commission on April 28, 1998 as an exhibit to the
Registration Statement, is herein referred to as the "Indenture."
We have examined originals or copies, certified or otherwise to
our satisfaction, of the Issuers' organizational documents, the form of
Indenture and form of Notes included therein and such other documents, records,
certificates of the Company and public officials and other instruments as we
have deemed necessary for the purposes of rendering this opinion. In addition,
we have assumed that the Indenture as completed for each series will be duly
executed and delivered by each of the parties thereto; that the Notes as
completed for each series will be duly executed and delivered substantially in
the forms contemplated by the Indenture; and that the Notes for each series will
be sold as described in the Registration Statement.
Based upon the foregoing and subject to the limitations and
qualifications set forth below, we are of the opinion that the Notes are in due
and proper form and, assuming the due authorization, execution and delivery of
the Indenture of each series by the applicable Issuer and the Indenture Trustee
and the due authorization of the Notes for each series by all necessary action
on the part of the applicable Issuer, when the Notes for each series have been
validly executed, authenticated and issued in accordance with the applicable
Indenture and delivered against payment therefor, the Notes for each series will
be valid and binding obligations of the applicable Issuer, enforceable against
the applicable Issuer in accordance with their terms, except that the
enforceability thereof may be subject to (a) bankruptcy, insolvency,
reorganization, arrangement,
<PAGE> 2
Onyx Acceptance Financial Corporation
April 28, 1998
Page 2
moratorium, fraudulent or preferential conveyance or other similar laws now or
hereinafter in effect relating to creditors' rights generally, and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and to the discretion of the court before
which any proceeding therefor may be brought.
The opinion expressed above is subject to the qualification that we
do not purport to be experts as to the laws of any jurisdiction other than the
federal laws of the United States of America and the laws of the State of New
York, and we express no opinion herein as to the effect that the laws and
decisions of courts of any such other jurisdiction may have upon such opinions.
We consent to the use and filing of this opinion as Exhibit
5.1(a) to the Registration Statement and to the reference to our firm under the
caption "Legal Matters" in the Prospectus Supplement and the Prospectus
contained therein. In giving such consent we do not imply or admit that we are
within the category of persons whose consent is required under Section 7 of the
1933 Act or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ ANDREWS & KURTH L.L.P.
<PAGE> 1
EXHIBIT 5.1(b)
[LETTERHEAD OF ANDREWS & KURTH L.L.P.]
April 28, 1998
Onyx Acceptance Financial Corporation
8001 Irvine Center Drive, 6th Floor
Irvine, California 92618
Re: Onyx Acceptance Financial Corporation
Registration Statement on Form S-3 (the "Registration Statement")
Ladies and Gentlemen:
We have acted as special counsel for Onyx Acceptance Financial
Corporation, a corporation organized under the laws of the State of Delaware
(the "Company"), and certain trusts, all of the beneficial ownership of which
will be initially owned by the Company (together with the Company, each an
"Issuer"), in connection with the proposed issuance by the Issuer of its Auto
Loan Pass-Through Certificates (the "Pass-Through Certificates"). The
Pass-Through Certificates of a series are to be issued pursuant to a Pooling and
Servicing Agreement or Sale and Servicing Agreement, between the Issuer, the
administrator (the "Administrator") and the trustee (the "Trustee") authorizing
such series. The Pooling and Servicing Agreement and the Sale and Servicing
Agreement, each in the form filed with the Securities and Exchange Commission on
April 28, 1998 as an exhibit to the Registration Statement, are herein referred
to collectively as the "Agreement."
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of the Issuer's organizational documents, the form of
Agreement and the form of Pass-Through Certificates included therein and such
other documents, records, certificates of the Issuer and public officials and
other instruments as we have deemed necessary for the purposes of rendering this
opinion. In addition, we have assumed that the Agreement as completed for each
series will be duly executed and delivered by each of the parties thereto; that
the Pass-Through Certificates as completed for each series will be duly executed
and delivered substantially in the forms contemplated by the Agreement; and that
the Pass-Through Certificates for each series will be sold as described in the
Registration Statement.
Based upon the foregoing and subject to the limitations and
qualifications set forth below, we are of the opinion that the Pass-Through
Certificates are in due and proper form and, assuming
<PAGE> 2
Onyx Acceptance Financial Corporation
April 28, 1998
Page 2
the due authorization, execution and delivery of the Agreement for each series
by the applicable Issuer, the Administrator and the Trustee and the due
authorization of the Pass-Through Certificates for each series by all necessary
action on the part of the applicable Issuer, when the Pass-Through Certificates
for each series have been validly executed, authenticated and issued in
accordance with the applicable Agreement and delivered against payment therefor,
the Pass-Through Certificates for each series will be validly issued and
outstanding, fully paid and non-assessable, and entitled to the benefits of the
related Agreement in accordance with their terms.
The opinion expressed above is subject to the qualification that we do
not purport to be experts as to the laws of any jurisdiction other than the
federal laws of the United States of America and the laws of the States of
California and New York, and we express no opinion herein as to the effect that
the laws and decisions of courts of any such other jurisdiction may have upon
such opinions.
We consent to the use and filing of this opinion as Exhibit 5.1(b) to
the Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus Supplement and Prospectus contained therein.
In giving such consent we do not imply or admit that we are within the category
of persons whose consent is required under Section 7 of the 1933 Act or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ ANDREWS & KURTH L.L.P.
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF ANDREWS & KURTH L.L.P.]
April 28, 1998
Onyx Acceptance Financial Corporation
8001 Irvine Center Drive, 6th Floor
Irvine, California 92618
Re: Onyx Acceptance Financial Corporation
Registration Statement on Form S-3 (the "Registration Statement")
Ladies and Gentlemen:
We have acted as counsel for Onyx Acceptance Financial Corporation, a
corporation organized under the laws of the State of Delaware (the "Company"),
and certain trusts, all of the beneficial ownership of which will be initially
owned by the Company (together with the Company, each an "Issuer"), in
connection with the proposed issuance by the Issuer of its Auto Loan Pass-
Through Certificates (the "Pass-Through Certificates") or its Auto Loan Backed
Notes (the "Notes"). The Pass-Through Certificates of a series are to be issued
pursuant to a Pooling and Servicing Agreement or a Sale and Servicing Agreement,
between the Issuer, the administrator (the "Administrator") and the trustee (the
"Trustee") authorizing such series. The Pooling and Servicing Agreement and the
Sale and Servicing Agreement, each in the form filed with the Securities and
Exchange Commission as an exhibit to the Registration Statement, are herein
referred to as the "Agreement." The Notes are to be issued pursuant to the
Indenture for each series, each between the applicable Issuer and the Indenture
Trustee (as defined therein). The form of the Indenture filed as an exhibit to
the Registration Statement is herein referred to as the "Indenture."
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of the Issuer's organizational documents, the form of
Agreement and the form of Pass-Through Certificates included therein, the form
of Indenture and form of Notes included therein and such other documents,
records, certificates of the Issuer and public officials and other instruments
as we have deemed necessary for the purposes of rendering this opinion. In
addition, we have assumed that the Agreement as completed for each series will
be duly executed and delivered by each of the parties thereto; that the
Pass-Through Certificates as completed for each series will be duly executed and
delivered substantially in the forms contemplated by the Agreement; and that the
Pass-Through Certificates for each series will be sold as described in the
Registration Statement. We have also assumed that the Indenture as completed for
each series will be duly executed and delivered by each of the parties thereto;
that the Notes as completed for each series will be duly executed and delivered
